Square & SchoolAuction.net, Pt. 2
A couple of weeks ago, there was news that Square, the innovative payments processor that makes those iPhone-based card-readers one sees at coffee shops everywhere, had introduced a new monthly-pricing plan: instead of paying 2.75% of each transaction, merchants could opt instead for a $275/month fee, and that would cover the monthly transactions, up to $250,000 in transactions per year.
Which sounds like it would be just the thing for processing auction-night transactions (as long as you didn’t want to swipe-and-store card numbers at check-in) - most of our customer’s events raise less than $250,000, so that restriction sounds not-so-restricting. And most do over $10,000 in card transactions on event-night, so opting for the $275 flat fee (rather than their other pricing plan - 2.75% per-swipe) pencils out, too.
- Transactions over $400 don’t fall under this plan - they are billed at 2.75%, in addition to the your $275 monthly fee
- Any transaction where the card doesn’t successfully swipe, and the number has to be typed in, also doesn’t fall under the plan - and those bill at 3.5%
The first point above is the killer. Why? Because fundraising-auction transactions are highly asymmetric - they are an excellent example of the 80/20 rule. You’ll make most 80% (or more) of your money on auction night off of 20% (or fewer) of the transactions. Those high-ticket transactions (I promise that almost all of them will be over $400, at least if you’re running an auction that makes $10,000 or more) will not fall under the $275 flat-rate pricing - but you’ll still have to pay the $275 fee anyway, plus the 2.75% on the big ticket transactions.
I did a study on one of our customers’ events, to see if this would have made sense for them. The chair graciously allowed me access to what they did pay through their current processor, and I compared it to what they would have paid if they had used this flat-rate plan from Square. Here’s the numbers:
|Total Amount Raised||$41,652.50|
|# of Transactions over $400||33|
|subtotal: transactions > $400||$28,486.00|
|# of Transactions under $400||97|
|subtotal: transactions > $400||$13,166.50|
|CC Fees (current processor)||$1039.04|
|CC Fees (Square Monthly Pricing)||$1058.37|
|CC Fees (Square Regular)||$1145.44|
So, although the Square monthly-pricing plan would represent some savings over their regular 2.75% per-swipe plan, neither would save money over the traditional merchant-processing account that this customer used. Add in the fact that Square doesn’t allow you to save guest-card numbers at check-in, and I can’t help but come to the conclusion that it’s not a great choice for fundraising auctions.