Square takes a payment from a customer's card, holds it briefly, then deposits the money into your bank account—usually within one to two business days

Square is a payment processor that lets you accept card payments in person, online, or by invoice. When a customer pays you through Square, their card information goes to Square's system, which checks with their bank to confirm the funds exist. If approved, Square holds the money temporarily, deducts its fee, and sends the remainder to your bank account on a set schedule. The whole process from swipe to your account typically takes one to two business days, though the customer's card is charged immediately.

Square works with debit cards, credit cards, and digital wallets like Apple Pay and Google Pay. You can use Square on a physical card reader (the small square device), through their online checkout, or by sending an invoice link to a customer. Each method follows the same basic flow: card information is encrypted, sent to Square, verified with the card issuer's bank, and then settled into your account.

Key Takeaways

  • Square charges a per-transaction fee (typically 2.6% plus 10 cents for in-person card swipes, or 2.9% plus 30 cents for online payments), which is deducted before money reaches your bank.
  • Payments are usually deposited to your linked bank account within one to two business days, though weekends and holidays can extend this.
  • Square holds your money in a temporary account called a settlement account before moving it to your bank, which is where disputes and chargebacks are deducted if they occur.
  • If a customer disputes a charge or their bank reverses it, Square can pull that money back from your account even after it has been deposited.

The three ways to accept Square payments

Square offers three main paths depending on how you take payments. In-person payments use the Square Reader, a small device that plugs into your phone or tablet. The customer inserts, taps, or swipes their card, and the payment processes in seconds. This is common for retail stores, food trucks, and service businesses.

Online payments

Invoice payments

What happens between the swipe and your bank account

When a customer's card is swiped or tapped, Square sends the card data to the customer's bank (the issuer) through a secure encrypted connection. The bank checks whether the account has sufficient funds and whether the card is active and not flagged for fraud. This takes a few seconds. If approved, the bank authorizes the transaction and holds the funds on the customer's end.

Square then holds the money in its own account, called a settlement account, while it waits to batch and deposit your payments. Most payments are grouped together and sent to your linked bank account once per business day. The timing depends on when the payment was made and your bank's processing speed—typically one to two business days, but sometimes longer if the payment was made on a Friday or before a holiday.

During this holding period, Square deducts its processing fee. For in-person card swipes, that is usually 2.6% of the transaction plus 10 cents. For online payments, it is typically 2.9% plus 30 cents. Keyed-in payments (where you manually enter a card number) may have a higher rate. The fee is subtracted before the money reaches your bank, so if a customer pays $100 in person, you receive roughly $97.40.

How Square handles disputes and chargebacks

A chargeback occurs when a customer's bank reverses a payment because the customer claims they did not authorize it, did not receive the goods or service, or were charged twice. The customer contacts their bank, not Square, to dispute the charge. Their bank then contacts Square and asks for proof that the transaction was legitimate.

Square will ask you to provide evidence—a receipt, shipping confirmation, email correspondence, or a signed agreement—showing the customer received what they paid for. If you can prove the transaction was valid, the chargeback is usually denied and the money stays with you. If you cannot provide evidence or the customer's bank sides with them, Square pulls the disputed amount from your settlement account and returns it to the customer's bank. This can happen weeks or months after the original payment.

Square also holds a small reserve from your deposits to cover potential chargebacks and refunds. The reserve amount varies based on your business type and history, but it is typically 5% to 10% of your daily deposits. This money stays in Square's account until a set period passes (often 90 days) with no disputes, at which point it is released to you.

Fees and what they cover

Square's main fee is the per-transaction processing fee. In-person payments (card present) cost 2.6% plus 10 cents. Online payments (card not present) cost 2.9% plus 30 cents. If you key in a card manually, the rate is often higher—sometimes 3.5% plus 15 cents—because there is no physical card to verify. Some Square plans also charge a monthly subscription (Square Plus is $99 per month), which lowers the per-transaction rate slightly.

Square does not charge a fee to set up an account, and there is no monthly minimum. You only pay when you process a payment. If a customer refunds a payment, Square refunds its fee as well. Chargebacks and disputes incur an additional fee—typically $15 per chargeback—which Square deducts from your settlement account.

International payments have different rates depending on the card's country of origin. Payments from cards issued outside the United States usually cost 3.9% plus 30 cents. Square publishes its full fee schedule on its website, and you can see the exact fee for each transaction in your Square dashboard.

Settlement timing and what delays deposits

Square deposits most payments within one to two business days. A business day is Monday through Friday, excluding federal holidays. If you process a payment on a Tuesday afternoon, it typically arrives in your bank account by Thursday. If you process a payment on a Friday, it may not arrive until Tuesday, because Saturday and Sunday do not count as business days.

Some situations delay deposits. If your bank is closed for a holiday, the deposit may be delayed by a day. If you process a large number of payments in a short time, Square may hold them for an extra day to verify there is no fraud. If your bank account information is incorrect or your bank rejects the deposit for any reason, Square will retry the deposit and notify you of the problem.

You can check the status of pending deposits in your Square dashboard under the Transactions tab. Each deposit shows the deposit date, the amount, the number of transactions included, and the fees deducted. If a deposit is late, you can contact Square support with your deposit ID to investigate.

How to set up Square and link your bank account

To start using Square, download the Square app or visit square.com and create an account. You will need a valid email address, a phone number, and basic business information. Square will ask for your legal name, business name, and the type of business you run. If you are a sole proprietor, you can use your Social Security number; if you are a business entity, you will need an EIN.

Next, link your bank account. Square needs your routing number and account number so it knows where to send deposits. You can find this information on a check or by logging into your bank's website. Square will verify the account by depositing two small amounts (usually under $1 each) and asking you to confirm the amounts. This takes one to two business days.

Once your bank account is verified, you can start accepting payments immediately. If you are taking in-person payments, order a Square Reader from the app. If you are taking online payments, generate a payment link or embed a checkout form on your website. Square provides templates and guides for each method.

Frequently Asked Questions

What happens if a customer's card is declined?

If the customer's bank declines the payment, Square notifies you immediately and the transaction does not go through. No money changes hands and no fee is charged. The customer can try a different card or payment method. Square does not retry declined payments automatically.

Can I refund a customer through Square?

Yes. In your Square dashboard, find the transaction and click Refund. The full amount plus Square's fee is returned to the customer's card within one to two business days. The refund appears as a separate transaction in your dashboard, and Square refunds its processing fee to you.

What if I do not have a business bank account?

You can link a personal bank account to Square. Square does not require a business account, though some banks may flag frequent deposits as unusual activity. If your bank questions the deposits, you can explain that they are from Square payment processing.

How long does Square keep records of my transactions?

Square stores transaction records in your dashboard indefinitely, as long as your account remains active. You can download transaction history as a CSV file for your own records or for tax purposes. If your account is closed, Square may retain records for a set period for legal and compliance reasons.

Can Square freeze my account or hold my money?

Yes, if Square detects unusual activity, high chargeback rates, or potential fraud, it can freeze your account and hold deposits pending investigation. This is rare for legitimate businesses, but it can happen. If your account is frozen, Square will notify you and explain the reason. You can appeal the decision by providing documentation of your business.