You can pass Square fees to customers using a credit card surcharge (if legal in your area, up to 3%) or offering a cash discount, both set up in your Square Dashboard under Settings > Payments > Service Charges; surcharges add a fee for card payments, while cash discounts offer a lower price for cash, requiring clear signage and adherence to state laws and network rules for surcharges.
Adding a line item. One straightforward way to pass Square processing fees to your customers is by including a dedicated line item for the fee in their purchase invoice. By clearly labeling this line item as “Square Processing Fee,” you inform your customers about the additional charge associated with their transaction ...
To do so:
In most states, it is legal for merchants to add a surcharge fee to customers' bills. However, even though surcharge fees are legal, there are generally strict requirements.
The most common fees for accepting credit card payments are transaction fees, which are usually a percentage of the payment plus a fixed amount per transaction. You can pass on credit card processing fees to clients by adding a small percentage or flat fee to the invoice to cover those costs.
Yes, charging a 3% credit card fee (surcharge) is generally legal in most U.S. states and follows card network rules (like Visa's 3% cap), but it depends heavily on your location and requires strict adherence to rules, such as not surcharging debit cards, capping it at your actual processing cost (not to exceed 3% for Visa/4% for Mastercard), and providing clear customer notification. Some states (like Connecticut, Massachusetts, Texas) may have their own bans or restrictions, so it's crucial to check your specific state laws.
Downsides of Square POS System
Nationwide, the surcharge rate for credit card transactions cannot exceed 4% of the total transaction (3% for Visa cards). Businesses must inform customers about the surcharge both online and in-store before payment. The surcharge must only cover processing costs and cannot be a profit-making tool.
The 2/3/4 rule is a guideline, primarily used by Bank of America, that limits how many new credit cards you can get: no more than 2 in 30 days, 3 in 12 months, and 4 in 24 months, helping to prevent over-application and manage hard inquiries on your credit report. While not universal, it's a useful benchmark for responsible card application, though other banks have different rules (like Chase's 5/24 rule).
I do not think you can avoid fees when using Square payment processing. That only occurs when a client pays cash. However, you can add a "convenience fee" to your transactions, I do this for all payments that are processed online.
Set up your surcharge
Small businesses and startups typically find Square's economics more attractive due to its free basic plan and lower hardware costs. A small restaurant processing $10,000 monthly with an average transaction of $25 would pay approximately $270 in processing fees with Square's 2.6% rate.
What Is the 15/3 Rule?
Yes, charging a 3% credit card fee (surcharge) is generally legal in most U.S. states and follows card network rules (like Visa's 3% cap), but it depends heavily on your location and requires strict adherence to rules, such as not surcharging debit cards, capping it at your actual processing cost (not to exceed 3% for Visa/4% for Mastercard), and providing clear customer notification. Some states (like Connecticut, Massachusetts, Texas) may have their own bans or restrictions, so it's crucial to check your specific state laws.
Using 90% of your credit limit creates a very high credit utilization ratio, which significantly hurts your credit score by signaling high risk to lenders, though you won't "overdraw" it like a bank account; it can also lead to higher interest rates (Penalty APRs), so it's best to keep utilization below 30%, ideally even lower, by paying down balances.
For every account that meets the Form 1099-K requirements, including non-profits, the IRS requires Square to report this information. According to the IRS, gross income is defined as all income from whatever source derived an individual or entity has received throughout the calendar year.
Aggregators like Stripe, PayPal, and Square are built for low-risk merchants. Their systems automatically freeze or terminate accounts that trip risk thresholds. A proper high-risk merchant account is designed for your profile from day one, giving you consistency, protection, and real human support.