Let me show you a real-world example. For my small business, I wanted to be able to take credit cards for payment from people who were attending classes I was teaching and from consulting clients who wanted to be able to pay by credit card instead of check. A few years ago, I decided to invest in Credit Card Terminal (US$0.99), one of the first payment apps for the iPhone. The company basically gives away the app and makes their money on a monthly merchant account fee. Currently, the company is offering a free sled-type credit card reader or a $50 iTunes gift card if you sign up through them for Authorize.net's merchant services, and charges $25 per month ($10 for Merchant Focus, $15 for Authorize.net) plus 24¢ and 1.74 - 3.79% per transaction.
For a $120 charge, Square charges me $3.45 in fees if I have the client sign the charge. That's it. If that happens to be my only credit card customer that month, I'm out $3.45. With my existing credit card service, I'm only out $2.75 -- but wait, I also have to pay that $25 in fees. Suddenly, if I only accept a single charge in a month, that $120 I just got from my client dwindles down to $92.25! Of course, the tax accountants in the crowd will say that I can claim the fees as bank service charges, but frankly I'd rather keep that $25 monthly fee in my bank account.
Companies that are doing a lot of credit card transactions will probably come out ahead using a more traditional app like Credit Card Terminal and a merchant account. But for those of us who just want to accept credit cards occasionally, Square is a bargain. Note that you cannot accept web payments using Square, but for those purposes, PayPal or Google Payments work quite well without requiring a merchant account.
So, how does it work in reality? Pretty darned well. You'll want to install the free universal app first -- while the iPhone app is excellent for capturing payments from friends and clients, it goes even further on the iPad by allowing you to create packaged transactions. These can be products (grande mocha latte, bike tire, whatever...) or services (business consulting by the hour, house cleaning, etc...). You set 'em up once on the iPad, and you can then tote up a bill consisting of a variety of goods, or services by the hour. Plugging the Square reader into the audio port on your device turns on a little icon showing that the reader is attached, and then all you need to do is swipe a credit card through it.
The first few times I tried doing a card swipe I was unsuccessful, until I used Square's suggested technique -- "smooth, even, steady." Now every swipe seems to go through immediately. The charge is authorized, and if approved you can then ask the person you're charging to sign the screen with a finger or stylus. If the customer wants a receipt, you can easily send it to them via email. If you're using the iPhone app, you can also choose to take a picture of the item that is being sold or a snapshot of the customer if you wish, which is kind of fun. The transactions are also geolocated, and receipts that are received from Square show a map with the location of the transaction.
As you can see in the screenshot gallery, the method of taking transactions is identical between iPhone and iPad -- the iPad app just acts more like a point-of-sale terminal, with pre-packaged prices for items. Once the transaction is completed, the merchant receives notification of the transaction via email, and if the customer asked for a receipt, they get one too. Customer receipts show how many times they've done business with the merchant, which is useful for determining who your top customers are. Tax can be collected, and tips added if you want -- it's just a process of checking the right boxes in the settings.
My only complaint is that the Square reader looks like it is going to be easy to lose! It's so small that one of my clients remarked while I was charging her credit card, "You need to stick that thing to your iPhone with Velcro or you're going to lose it!" Note to case manufacturers -- the first company that creates an iPhone or iPad case with a spot for locking away a Square reader and a PoGo Stylus is going to get my business.
If you have any concerns about the security of such a system, I recommend reading up on Square's security measures. One important measure is that at no time is the credit card information stored on your device. It goes right from reader to Square, and it's encrypted the entire time.
Square is perfect for people who want to accept credit cards for anything. Are you holding a garage sale? Accept credit cards and get approval on the spot. Helping out at a bake sale at the school? Let people pay with a card. Maybe you're a roving troubadour who wants to get paid by credit card -- you can do it with Square. Now, it's time for me to go break the bad news to my existing credit card service. I just wish I could get them to refund the $300 in annual charges they've been pulling out of my accounts.