OMG! Square fees will break me!

Processing rates are going up for Square users on 11/1/2019. Many small business owners are looking for alternative processors or considering adding fees and minimums to offset the increase. The increase is a lofty dime per transaction PLUS a 2.60% fee. Food vendor selling dollar items are doing the math and having nightmares of bankruptcy over this increase. So, what is the REAL impact of this or any other increase to credit card processing?

First question to ask is how many guests actually only charge a single dollar? Vendors using a POS system already know this and can figure the mathematical impact on their business. From what comments I have read or heard most vendors are fixated on the rare dollar ticket charge, ignoring their actual check average for credit/debit processing. Either freaking out at the increase or just saying “it’s not that much and no big deal.”
Here are the mathematical facts. On a single ticket the new rate IS higher until the ticket total exceeds $66.67! At that point the new rate is cheaper. Catering only businesses will enjoy paying less fees while the daily hot dog vendor will suffer higher rates. Using a ticket average of $5.00 (rural America hot dog, chip & drink combo) the price increase is over 67%. Imagine paying 67% more for your food! If your ticket average is at $12.00 the increase percentage drops to just under 25%. Suffice to say small ticket average businesses are getting screwed.
What options are available to food vendors? Four options come to mind:

1. Do nothing. Eat the increase and suffer less profits.
2. Increase prices. Perhaps upset guests.
3. Change processors. Learn something new.
4. Charge some type of fee or set a charge minimum.

“Do nothing”. This is Square reaching directly into your pocket and taking your money. Ever since Square started, they depended on small business to sustain their business model. Businesses that didn’t qualify or perhaps afford merchant accounts were serviced by Square. The ability to process debit and credit literally brought food truckers into modern times, lending legitimacy to the industry. Inexpensive processing paired with the high quality and functional free features Square offers helps to level the accounting playing field for a small-time operator. BUT Square, like so many quick growing companies, chose to put stockholders ABOVE their clients leaving the little guy to struggle.
Doing nothing is not the correct decision. Fight for your profits! You earned them. This increase is not something I will just “eat” and neither should you.
“Increase prices” is a short-term fix and some vendors feel will upset their guests. Price increase are never fun but are a necessary consequence of inflation, supply and demand and just economics in general. In the late 70’s and early 80’s every single year on January 1st minimum wage was raised. On New Years Eve instead of partying we revised our menu boards and programmed price increases into the cash registers. Every year guests whined about coffee going up a nickel and the roast beef sandwich going up a dime. Guests knew about the wage increase (news reported facts not opinions back then) and got a practical lesson in economics and business. Guess what? They came back the next day.
Street vendors have an aversion to using coins because it makes math slightly more difficult. Many feel the change making process is cumbersome and “slows” the line movement. WRONG. A great cashier is friendly, fast and CAN COUNT. Making change is easy and in no way slows down the process. A great cashier will always blow away the kitchen. ALWAYS. Your operational slow point is not making change it is cooking. Raise prices a quarter which covers the transaction fee increase. Use Square POS (the app is free and works on any cell phone) to do the math for you.  Buy a belt coin holder to make change like this one and explain to your complaining guests what Square did. They appreciate the honesty and most likely side with you, anyway.
“Change Processors” may not be the best option but certainly does make you feel better. PayPal here is a flat fee option similar in fees to Square BEFORE the increases. PayPal does have some negatives as do many of the other processors. Some have horrible customer service, slow deposits, hidden fees, equipment charges and a slew of other issues making them a poor choice for a small food operation. This site reviews all the processors with details on POS capabilities and pricing.
If changing your processor is the route you want to choose, please do the math before you change. A lot of those “free” systems are not really free or they add on fees that are illegal in many states.
“Charge some type of fee or set a charge minimum” as noted above fees are illegal in many states and frankly come across as petty. Setting a minimum screams “I am a cheap business” and chases off more business than it saves in fees. There is one method that is legal and in fact encouraged by credit card companies. Offer a cash discount. Again, food vendors are afraid of coins and this discount system guarantees you’ll need pennies, nickels, dimes and quarters.
You would price your menu assuming everybody will be using a card. Print the menu with these prices. When someone offers to pay with cash you simply discount (percentage wise) the price listed on your menu. This process is simple and straight forward. Card guests pay what they see and are not accessed some form of penalty for using a card, while cash guests are pleasantly surprised with a small discount. Again, you will have to be prepared to use coins. This article spells out the differences in surcharges, cash discounts and convenience fees.
For me, the easiest thing is to simply assume everyone will use a card, price accordingly on the quarter as needed. Continuing to use Square passing along any future fee increases to my guests via modest across the board price hikes. Just like when the price of bread goes up or minimum wage. 

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