What Is Square? POS System Explained

Managing a business requires tools that streamline essential tasks like payment processing, inventory tracking, customer management, and sales reporting. As your business grows, those tools should scale with you. Square is a popular all-in-one platform that combines payments, point-of-sale (POS) software, and business management tools in a user-friendly ecosystem designed for small businesses, with the flexibility to support growth over time.

What is Square?

Square is an all-in-one point-of-sale (POS) system that combines payment processing, ecommerce tools, and built-in business management features in a single platform. Businesses can use Square to accept payments in person, online, and on mobile devices while managing inventory, customers, and sales from one dashboard.

Because the software is app-based, getting started is simple: create an account, download the free POS app on a compatible device, and begin accepting payments. Square also offers integrated hardware and advanced tools for payroll, marketing, invoicing, and reporting as your needs grow.

Square is especially popular with small and new businesses thanks to its feature-rich free plan. However, it also provides industry-specific POS systems and scalable upgrades, making it suitable for growing and established businesses alike.

Square payment processing

Square is a fintech company, and payment processing is at the core of its platform.

Square operates as a payment facilitator (PayFac), meaning it maintains a master merchant account with acquiring banks. When a business signs up for Square, it receives a sub-merchant account under that master account. This structure allows businesses to start accepting payments quickly without going through a traditional merchant account underwriting process.

As a payment facilitator, Square handles the movement of funds on your behalf. It connects to major card networks for credit and debit card payments and to the ACH network for bank transfers. Once a transaction is approved, Square processes the payment and deposits funds into your linked bank account, typically within one to two business days.

Because of this model, businesses can avoid lengthy approvals and begin accepting multiple payment methods almost immediately. Square also offers transparent pricing, no long-term contracts, and no required monthly fees for its basic POS plan.

Available payment methods

Payment processing fees

Like most payment facilitators, Square offers flat-rate pricing, which may not be the lowest terms but are easiest to manage for small and new businesses. Businesses that process more than $250,000 annually must work with Square to negotiate custom rates, which typically involve volume discounts and likely better pricing models such as interchange plus or subscriptions. 

Below are Square’s standard payment processing fees:

• Monthly payment processing account fee: $0
• Cash, cheque, vouchers, and other tenders: $0
• Credit cards:
  • In-person transaction: 2.6% + 15 cents to 2.4% + 15 cents
  • Online: 3.3% + 30 cents to 2.9% + 30 cents per transaction
  • Keyed-in and card-on-file transactions: 3.3% + 15 cents per transaction
  • Chargeback fee: Waived up to $250/month
• Invoicing: 3.30% + 30 cents to 2.9% + 30 cents per transaction
• ACH Payments: 1%, minimum $1
• Afterpay: 6% + 30 cents per transaction
• CBD program transactions: From 3.5% + 10 cents per transaction
• Same-day funding: + 1.75%
• Volume discounts: With a paid POS plan, or more than $250,000 in annual sales volume and over $15 in average ticket size

All Square payments processing comes with free dispute management, active fraud prevention, end-to-end encrypted payments, live phone support, and PCI compliance.

Square hardware

While Square’s software is app-based, it does provide its own range of proprietary hardware, which is designed for scalability. 

It starts with mobile credit card readers, where users get a separate magstripe and contactless device. Next is a versatile iPad stand with a built-in card terminal that can be set up as a countertop or kiosk. Lastly, Square provides mobile and countertop versions of a stand-alone checkout terminal, complete with a built-in touch screen, customer display, and swipe, chip, and contactless card readers.

Square Magstripe Reader

First reader free $10 every additional reader

Square Contactless Reader

$59

Square Stand

$149 or $14 per month over 12 months

Square Terminal

$299 or $27 per month over 12 months

Square Handheld

$329 or $30 per month for 12 months

Square Register

$899 or $44 per month for 24 months

Square point of sale

Square POS is available on iPads, iPhones, Android devices, and Square’s proprietary hardware, including Square Register and Square Terminal. Businesses can accept payments in person, online, and on mobile devices while managing sales, inventory, and customers from a single dashboard.

Square now offers three unified software plans per location: Square Free, Square Plus, and Square Premium. Businesses can switch or cancel plans at any time without long-term contracts.

What’s included in the Square POS plan

All plans include core business tools such as:

• POS software
• Inventory tracking
• Payment processing for cash, credit, debit, mobile wallets, and gift cards
• Invoicing and estimates
• Online store and website builder
• Virtual terminal
• Customer directory (CRM)
• Sales reporting
• Returns and refund management
• Tip management
• Digital and printed receipts
• Offline payment processing (with limitations)

Higher-tier plans include expanded reporting, employee management tools, and advanced operational features designed for growing or multi-location businesses.

Key upgrades with paid plans

What you get with upgrading

Upgrading to Square Plus is designed for growing businesses that need deeper reporting, stronger team management, and slightly lower transaction rates for in-person and online payments.

Square Premium is built for higher-volume or multi-location businesses. It offers the lowest in-person processing rate, expanded operational oversight, and advanced support options.

Additional features and products

Square offers a full ecosystem of business tools across four main categories: commerce tools like payment processing and point of sale, customer management tools like marketing and CRM, employee management tools like shift scheduling and payroll processing, and banking tools like business checking accounts. 

Here’s a full breakdown:

Square commerce products

Beyond POS software, Square offers a suite of commerce tools that allow businesses to sell, invoice, and collect payments across multiple channels.

Square’s invoicing feature is easy to customize and offers automated tools for alerts and follow-ups. (Source: Square)

Square Online comes with a drag-and-drop functionality, making it easy for first-time users to set up their website. (Source: Square)

Square’s mobile-first online menu opens your online ordering website like an app (Source: Square)

Square customer management plan

Square includes built-in customer management features and offers advanced marketing tools as optional add-ons. These products integrate directly with Square POS, ecommerce, and payments data to help businesses engage and retain customers.

Square combines email and text marketing with CRM to nurture your customer base (Source: Square)

Square Messages help businesses efficiently manage customer communications from a single platform. (Source: Square)

Square’s loyalty program tools automatically integrate into the customer directory, tracking purchase history and customer preferences. (Source: Square)

Square’s customer directory is seamlessly integrated with other Square products such as text and email marketing and loyalty tools. (Source: Square)

The Square Photo Studio is integrated with the product catalog, so updates are seamless across all sales channels. (Source: Square)

Square Go lets customers manage their appointments from a mobile app. (Source: Square)

Square staff products

Square offers several workforce management products that integrate directly with Square POS and payment data. These tools help businesses manage scheduling, payroll, communication, and HR compliance from the same ecosystem.

Square Shifts provides automated time cards to show attendance, shift swapping and time-off requests within the app. (Source: Square)

Manage shift swapping and time off requests in the Teams app (Source: Square)

Square banking products

Square offers integrated financial services through Square Banking, which includes business checking, savings, credit, and lending products. These accounts are designed to work seamlessly with Square POS and payment processing.

Use Square Savings to set aside funds for sales tax and other business goals. (Source: Square)

Loan application and repayment are easy and done from the Square dashboard (Source: Square)

Benefits of using Square

All-in-one business solution

Square provides an integrated ecosystem that combines POS software, payment processing, ecommerce, and business management tools in one platform. Merchants can accept payments in person, online, and via mobile devices using Square’s proprietary hardware or compatible third-party devices.

Square also offers industry-specific solutions for retail, restaurants, and appointment-based businesses. Additional tools, including team management, payroll, marketing, and loyalty, are available as add-ons. For businesses that already use other software, Square supports a wide range of third-party integrations, including accounting, ecommerce, and delivery platforms.

Feature-rich free plan

Square’s free POS plan lowers the barrier to entry for new and small businesses. There are no monthly software fees for the basic plan, allowing merchants to start accepting payments with minimal upfront cost. Businesses only pay per-transaction processing fees, making it easier to launch without long-term contracts or subscription commitments.

Easy to use

Square is known for its user-friendly interface and straightforward setup process. Businesses can create an account, download the POS app, and begin accepting payments quickly.

The dashboard includes guided setup tools for adding inventory, configuring payment options, customizing invoices, and launching an online store. This simplicity makes Square especially appealing to first-time business owners.

Multichannel selling capabilities

Square supports in-person, online, and mobile sales from a single account. Each account includes access to Square Online, enabling businesses to build and manage an ecommerce site that syncs automatically with in-store inventory.

Merchants can also generate payment links, QR codes, and digital invoices directly from the dashboard to collect payments through email, text, social media, or embedded checkout pages.

Seamless ecosystem

All of Square’s tools are fully integrated. Inventory, customer profiles, reporting, and sales data sync in real time across channels. This built-in omnichannel functionality helps businesses maintain accurate stock levels, track customer behavior, and deliver a consistent buying experience, whether customers shop online or in-store.

Read more: Square reviews

Square competitors and alternatives

Square’s main competitors and alternatives are PayPal, Stripe, and Helcim. All three of these companies also offer free accounts with different payment processing tools.

Read more: Check out our recommended best alternatives to Square.

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