Phone Swipe or Square?

Mobile credit card processing is gaining widespread popularity, and for good reason, smartphone technology has come a very long way in the last few years and has proven to be a good fit for some merchants to accept credit card payments on their phone. It also makes accepting cards more accessible to the micro businesses that before smartphone payment options could not justify any monthly costs, or pay for expensive equipment to take credit cards on a more traditional means. There are several different options available today.  Most, however, have monthly fees, minimum processing requirements associated with them, and or long term contracts.  Square has been hitting the marketplace hard with advertisements promising no monthly fees and a “low” per swipe percentage, and was the first to market an uber-simplified fees program that made sense to people that could not justify monthly or confusing traditional payment solutions.  North American Bancard (NAB) in partnership with BNG Holdings, Inc. has released a similar product. Phone Swipe, and is set to give Square a run for it’s money with equally simplified pricing, better support and faster more dependable funding.

Square and Phone Swipe are not for everyone, even though recent marketing from Square would want you to believe that it is. The main reason is the super simple pricing model. Most people don’t really know but when it comes to credit card processing, all processing companies even Square pay interchange costs at the exact same rates from the card associations. To get to a simplified strait percentage point you have to bundle hundreds of card types into a single rate and to make it still profitable. To do that you need to find your highest cost card types and at the very least cover that cost, so at 2.75% the high end cards are covered but there is a large profit margin on the less expensive card types like debit.

First off Square or Phone Swipe are definitely not a good solution for businesses that consistently run more than several thousand dollars in credit cards per month and have an average transaction of over $15. That would be most any full time business if you really think about it. Now if you have a part time business with inconsistent sales or average $5 transactions and can afford to rely on your smartphone to take payments. Or need a mobile solution then Square or Phone Swipe might be a great solution for you.

Comparison of Phone Swipe and Square

The following post is an “Apples to Apples” comparison of Phone Swipe and Square. They are extremely similar in many ways but we will explain the differences. We (BNG Holdings, Inc.) are attempting to write this post as impartial as possible but the reality of it is we do sell Phone Swipe because we truly believe in most circumstances it is a better product for most people that fit into the “Square” market. If you contact us and have a unique situation where Square is better, we will be the first to tell you to stick with Square.


The most important thing, as a merchant, is to keep the process of taking payments as smooth as possible.  Technical support is a vital part of taking mobile payments.  With technology there can, at times, be problems.  Instant support is extremely important.  A lot of customers do not carry cash, if you are unable to process their credit card, you lose sales.

Square offers only online support, via their Self-Service website, email or twitter.

BNG’s Phone Swipe offers the support of a 24/7 Customer Technical Support phone line, as well as online assistance.  Even better, is local face to face and national phone support from BNG Holdings, Inc.’s office.  With BNG’s Phone Swipe, you have all the benefits of a full merchant account without any of the monthly fees or minimums.  This means you are entitled to all the customer service and support that goes with a regular traditional merchant account.

Aggregate Account VS Merchant Account

One thing that always bothered me when Square first came out was figuring out how they were able to offer such a one-size-fits-all solution and how they were able to manage so many micro accounts without being an established processing company. I found out later that its because they are not setting merchants up with a merchant account of their own. Instead they are giving them access to a large aggregate account that is in Square’s name and not the merchants. One thing Square conveniently leaves out of their advertisements is when you sign up with them, you get an aggregate account.

An example of how an aggregate account works is as follows:

XYZ Holdings Company opens a “master merchant account.”  They then “sell” the use of it to thousands of merchants.  So everyone is sharing the same merchant account.  XYZ Holdings Company collects all of the money the several thousand merchants process, and then pays each merchant their share of the funds.  By the way, XYZ Holdings Company reserves the right to hold these funds as they see fit since technically it is theirs at this point. The other problem that comes into play with an aggregate account is that since Square is not a true processing company they are getting the aggregate account from a third party processor that also has the right to hold the funds, if they hold the risk on the account.

Square claims to deposit your funds the next day.  If you read the fine print, your deposit is initiated within 36 hours.  After the deposit is initiated, you still have to wait for the banks to move the funds, resulting in an additional 24-48 hours before you receive the funds into your bank account. Also keep in mind the federal reserve and your bank do not transfer money on weekends so with Square you could run a sale on Thursday afternoon, the 36 hour initiation period would not trigger until some time on Saturday and the funds would start transferring Monday morning and might not show up in your bank account until Wednesday. In that very real scenario it took you six days to get payed. How many people can wait that long to get payed and have a sustainable business?

Keep in mind, this is for SWIPED transactions.  With card not present transactions, Square can, and will, hold your funds for up to 30 days if you process more than $2002 in a trailing 7 day period.

With Phone Swipe, you have your own merchant account and your own merchant number.  NAB will deposit your funds within 1-2 business days after they are run, with no holding time like Square.  This is regardless if they are swiped or card not present transactions.  There is no cap on the amount of business you can do.  The amount you are funded will be the total transaction amount less the processing fees. This results in much more consistent funding and is roughly twice as fast. I have worked with thousands of merchants over the years and I can’t think of any that would want to wait an extra 36 hours to get payed, especially ones that need to order products or pay employees with that money.


At first glance, pricing for both options are relatively similar.

Square promises 2.75% for all swiped transactions, no monthly fees or minimum processing required, no cancellation fee, and a free card reader.  The key here is SWIPED transactions.  If you are keying in any transactions, your rate will be 3.5% and $0.15 per transaction.  If for any reason your card reader doesn’t work, you will be paying the higher MOTO (card not present) rate of 3.5% + $0.15.

Phone Swipe promises a rate of 2.69% for all swiped transactions, no monthly fees or minimum processing required, no contract or cancellation fee, and a free card reader.  The MOTO (card not present) rate is 3.49% and $0.19 per transaction.  Phone swipe has proven to have a more reliable card reader device, thus eliminating a lot of downgraded transactions falling into the MOTO rate.

Reliability and Supported Devices

iPad POS
At the time of this post, Square currently has 19 mobile devices with known issues.  They also do not support any Android devices running on Honeycomb, or any modified versions of the Android software.  The reader requires a 3.5 headset jack with microphone to operate.  If your mobile device has a “small screen classification” you are out of luck.  You will need GPS enabled, access to the internet, and access to Google Play (for Android devices).  Square requires Apple devices to run an iOS 4.0 and up, Android devices to run an OS 2.1 and up, and BlackBerry is not currently supported by Square.  (See Square’s supported devices.) Square also has support for cash drawer and receipt printer integration when used with the iPad.

Phone Swipe had over 40 supported devices, and only 4 with known issues.  The reader requires a 3.5 headset jack with microphone to operate, but if you don’t have a supported jack you can still use the phone application for MOTO transactions.  Android devices are required to have a OS of at least 2.1.  Phone Swipe is compatible with Apple, Android and BlackBerry devices. One really cool feature is that Phone Swipe supports store and forward a feature that allows you to swipe and store a transaction when you do not have a phone signal and lets you upload that transaction when you get to a place where there is signal. Phone Swipe also has support for a cash drawer and receipt printer integration when used with the iPad, stop by our office and we would be happy to show you our demo.If you find you don’t fit that model give us a call and we can point you in a better direction. We have solutions for virtually any type of business from entry level solutions like Phone Swipe all the way up to custom programed payment software integrations and touch screen POS systems. We have our hands in every type of technology related to payments processing and are truly experts in payment processing. Contact Us

Written By: Ryan Theis & Katie Gjerde