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Cost Analysis of Four Leading Payment Processing Apps

Accepting payments using a cell phone or tablet device has never been easier—whether establishing a payment processing system for your daughter’s lemonade stand or setting up a cashier at a trendy coffee spot in New York City, you’ll be able to accept payments anywhere you can receive Wi-Fi or cell phone reception.

Credit card payment processing app

Below are four of the most popular options.

Square

Square EMV reader

photo credit: Square

Certainly, as one of the oldest and yet fastest growing payment processing apps out there, Square is probably the app with which most customers and business owners are most familiar. The app, itself, is intuitive with a simple, yet elegant style.

Its fees are just as straightforward as its design—2.75% on all credit card transactions. Of course, this isn’t the lowest rate out there, but it isn’t the highest. If you have many small transactions, you’ll save loads over the flat rate fees at many other companies. For example, a $5 transaction on square will cost you 13 cents, but you’ll lose money with a company that charges a flat rate of 75 cents per transaction. The reverse is true for large transactions—if your average transaction is $100, you’ll pay $2.75 with Square, and still only pay the 75 cents with that hypothetical flat-rate competitor.

PayPal

Paypal Here

PayPal does a lot more than sending money to family members via email or paying for online auctions—now PayPal has an app that allows you to accept credit cards in the same manner as Square, and for slightly less: 2.7% on all transactions. The drawback, though, might be that the funds deposit into your PayPal account rather than another bank account and you will have to wait a few business days for this money to transfer.

PayPal, the leader in online peer to peer purchasing, might be the wisest choice if you have an online store as well—allowing all of your funds to deposit seamlessly in one central location.

Shopify

Shopify POS

photo credit: Shopify

Shopify, perhaps on the pricier side of this list, offers a POS app that allows you to analyze and chart inventory and sales performance with ease. With Shopify, you have management solutions as well as a payment processing app. For this reason, you have to pay a monthly fee for use of their POS system, in addition to the 2.7% charge for each card transaction. Although this may be costlier than other options, the savings arrive in the form of less time spent on administrative and financial tasks.

Intuit

Intuit QuickBooks payment processing app

photo credit: Intuit QuickBooks

Intuit is part of the QuickBooks family of software, providing easy and instant integration with the full suite of QuickBooks Pro Accounting software. The regular plan, unlike Square and the others on the list is 2.40 percent plus $0.25. This is the opposite of Square: you lose quite a bit of money on small transactions, but save quite a bit on larger transactions. For example, a transaction of $10 would cost you $0.49 ($0.24 + $0.25). The same transaction on square would cost you $0.27. But, a transaction of $100 would cost you $2.65 ($2.40 + $0.25), while on Square it would cost $2.75.

As the cost goes up, so do your savings. For businesses who are willing to pay a $20 monthly fee, the cost of each transaction goes down to 1.75% + $0.25.

Intuit vs Square

So, let’s test two of the most popular payment processing apps, Intuit and Square, in a realistic hypothetical situation.

Suppose there is a high traffic counter-service restaurant where the average credit card transaction is about $30 and there are 50 of these transactions per day, a total of $1500 in credit card transactions. And in thirty days, that’s a total of 1,500 credit card transactions.

So, in one month with Square, you’d be charged $1237.50: $30 x 2.75% x 1500 transactions. Compare this to one month with Intuit (paying $20 for the reduced transaction charge). This would be $1182.50: [($30 x 1.75%) + $0.25] x 1500 transactions +$20. This would be a savings of $55 a month. This shows that for larger transactions, Intuit is the clear winner in savings.

But if we change the scenario to a coffee shop in New York City where the average credit card charge is $3, and there are 500 transactions per day, (still netting the same amount of money per day, $1500) the results are radically different. With Square, a month would cost you exactly the same, $1237.50. On Intuit, though, this would cost you $4,557.50.

With smaller transactions, Square is the clear frontrunner.

Takeaway

The takeaway from this cost analysis might be that costs for payment processing, although they appear to be similar, can vary wildly depending on the needs of the business. Consider the typical amount of each transaction in order to make the wisest choice.

About author

Ivan Widjaya
Ivan Widjaya 2458 posts

Ivan Widjaya is the Owner/Editor of Noobpreneur.com, as well as several other blogs. He is a business blogger, web publisher and content marketer for SMEs.

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