Square Eliminates Deposit Holds And Drops Unpopular Monthly Pricing Plan

In two moves to attract and retain merchants, Square Inc. on Wednesday announced that it has eliminated holds on merchant deposits as well as deposit limits on U.S. transactions, and will drop a monthly pricing plan that the mobile-payments processor says merchants didn’t like.

The new deposit policy applies to manually entered transactions, such as those that are key-entered, and online transactions if the merchant uses the Square Market service. Funds from those transaction types will be deposited in merchants’ bank accounts within one to two business days, Square says.

Under Square's old deposit policies, anything over $2,002 over a seven-day period would not be deposited the next business day, a spokesperson for San Francisco-based Square tells Digital Transactions News. While deposit policies vary by merchant acquirer and an individual merchant’s risk profile, acquirers sometimes put holds on deposits for three to five days to ensure they have good funds and limit risk.

Square is promoting the new policy as a way to differentiate itself from conventional acquirers. Square said in a news release that its policy will provide “a crucial advantage” to mobile merchants such as caterers and contractors by making cash available to them faster so they can quickly buy the items they need to serve their customers.

“Removing deposit limits and related holds is the latest step by Square to upend financial norms and make running and growing a business easier than ever for merchants,” Square said.

Meanwhile, Square announced that it will eliminate the optional monthly flat rate that it introduced in August 2012. Under the plan, a merchant generating up to $250,000 in annual charge volume would be charged a flat $275 a month, with no additional fees. Square’s normal transaction fee is 2.75% per swiped transaction, which merchants currently on the monthly plan soon will be charged.

“Over the past year we heard from many of our customers that caps and limits in the program were inhibiting growth—at a certain point, rates went back up the more you sold,” the company said in a post on its Web site. “So, effective Feb. 1, 2014, we’re replacing the Square monthly pricing program with one low per-swipe rate for your business. We want our pricing to be simple: no more limits or complicated monthly caps at all. Just one low, flat per-swipe rate for your business.”

For merchants with annual volumes between $120,000 and the upper limit of $250,000, the plan offered lower expenses with each additional transaction, all the way down to 1.32% of the sale. But the pricing option didn’t benefit merchants generating less than $10,000 a month in Square volume, likely a large number of Square’s merchants. And after starting with part-time sellers and very small merchants, Square of late has been moving up-market by courting larger merchants.

“We are hard at work building features for larger businesses, because we know growth comes with its own set of unique needs,” the post says. “You can look forward to several useful new features in the coming weeks.”

Merchants currently enrolled in the program get a grace period through January. In February they’ll be billed on the per-swipe rate of 2.75%. Square didn’t say how many merchants use the monthly plan.