Musicians don’t like business. If a musician likes business, there is something wrong with that musician. Most musicians don’t understand how to get to easy solutions for their business (if you are playing music for money, you have a business… whether you like it or not). Don’t worry though, you’re not alone. I’ve been on the road and stopped off at Jeff’s Snack Shack in the middle of nowhere to satisfy my sweet tooth. Guess what? I didn’t have cash on me. Guess what else? Jeff doesn’t take credit cards. Why? Because Jeff thinks it’s too expensive to accept credit cards (and he’s wrong). Guess who didn’t get a Twix? ME. GUESS WHO IS NEVER GOING BACK TO JEFF’S SNACK SHACK???
Last year, before I hit the road for the first time, I thought it would be wise to be able to accept credit cards for this very reason. Plus, we (the band) is always bitching about not being able to purchase something because a store/restaurant won’t take credit cards). We didn’t want to be like those businesses. The future is plastic. Money will be around, but less people will carry it as more and more places are accepting credit cards. We have to adapt. How?
Last year, options were starting to widen. Before last year, you had to contact a company that sold expensive credit card machines. You had to set up a merchant account. Then the iPhone came along, and so did a commercial that explained how easy it was to accept credit cards on the iPhone. Boo yah. I had an iPhone. I got the app. I created a merchant account, and I started charging people for my merchandise. I also had to pay $25 per month to have a merchant account. It was worth it.
Today, one of the founders of Twitter launched a new company called Square. They allow EVERYONE and their MOTHERS to accept credit cards WITHOUT a merchant account. The future is here. The best part about Square is that there is NO monthly fee (because there is no merchant account). But here’s where it gets tricky.
(BE WARNED: This is the nerdy part of this entry with NUMBERS. If numbers scare you, then don’t read ahead, and please, stop playing music.)
Last year, I checked out a lot of pricing for different companies. If you are a band and you want a credit card terminal, you need to get a wireless terminal (because you move your business to different venues and not all of them have internet access). This means, you will pay about $800-$900 for a terminal. You will also pay for the wireless access and a monthly service charge (with a monthly minimum).
Here’s the bottom line:
Terminal: $800-$900
Monthly Cost: $50
Contract: 2 years
Charge per transaction: 1.09% - 2.5% + $0.25
Here is what Square offers:
Cost of iPad/iPhone/Android: $99 - $499
Cost of Square’s CC Reader/App: FREE
Monthly Cost: $0
Contract: None
Charge per transaction: 2.75% - 3.5% + $0.15
Not only is having an iPhone/iPad cheaper than a wireless credit card terminal, you can do so much more WITH these Apple products. I can check facebook, update shows, BLOG, etc. I can also sell merch using Square’s free app. Once you sign up, they also send you a free credit card reader that plugs into the headphone jack. It’s that easy. Sign up takes about 5 minutes.
So… why wouldn’t you accept credit cards at this point?
I discussed Square with a guy who sold credit card terminals, and we decided that the ONLY way it was better to have a separate credit card terminal is if you sell a CRAPLOAD of merchandise. So if you’re John Mayer or you play Warped Tour every year, you might want to have a wireless credit card terminal. Here’s the difference on percentages and fees per transaction:
The wireless terminal: A CD sold for $10 on this terminal (at 1.09% + $0.25) will cost $0.10 + $0.25 = $0.35 per transaction.
Square: A CD sold for $10 on this app (at 2.75% + $0.15) will cost $0.28 + $0.15 = $0.43 per transaction.
The difference per transaction for a $10 CD is $0.08. Yes, Square is more expensive per transaction. Keep in mind that you aren’t paying monthly fees ($50/month) though. To counteract the monthly service fee, you would have to sell $6,250 worth of merchandise to break even with what Square offers before you dug out of the hole of the monthly fees.
Some of you are thinking about the cost of internet on an iPad/iPhone/Android. If you are only using your iPad/iPhone/Android for Credit Card payments, there is something wrong with you. However, let’s factor in the cost of a data plan. It costs $30/month to have the internet on an iPhone/iPad. If you have an iPad, you do not have a contract. So the difference is STILL $20 per month (which means you would have to sell $2500 of merch per month on the wireless terminal to offset the costs of monthly fees before turning a profit).
So here’s the bottom line folks, if you are a local/indie musician who sells under $2500 of merch per month (and by looking at most local/indie musicians who have other jobs and drive in tour vans that cost about $1000, that’s most of us), Square is for you. Plus, you’ll have a cool gadget that you will allow you to keep in touch with your internet social marketing. If you make more than $2500/month on merch alone, then you probably already knew about everything I just ranted about.
For godsakes, do a favor for your fans/customers (and my band members). Start accepting credit cards.
