Do Square’s Terms and Conditions Spell Trouble for Your Online Business?

Jun 27, 2016

A few days ago, Square announced an update to their existing Terms and Conditions, and the implications for online entrepreneurs are far reaching.

Online Payment Providers have been growing in size over the past few years as more and more merchants transition to selling online. With that massive growth comes quite a few unanswered questions and some merchants finding themselves cut off with no way to accept payments – and no explanation.

It’s just scratching the surface, but understanding each provider’s Terms and Conditions is a good step toward avoiding serious issues. I want to look verify specifically at one particular area that may have gone unnoticed, despite having the greatest potential impact for merchants; Square’s new prohibited merchant types.

If Square believes your company is operating in one of the following industries, they now consider your business type **prohibited** (and will not accept your business):
(1) any illegal activity or goods,
(2) paraphernalia that may be used for illegal activity
(3) buyers or membership clubs, including dues associated with such clubs,
(4) credit counseling or credit repair agencies,
(5) credit protection or identity theft protection services,
(6) direct marketing or subscription offers or services,
(7) infomercial sales,
(8) internet/mail order/telephone order pharmacies or pharmacy referral services (where fulfillment of medication is performed with an internet
or telephone consultation, absent a physical visit, including re-importation
of pharmaceuticals from foreign countries),
(9) unauthorized multi-level marketing businesses,
(10) inbound or outbound telemarketers,
(11) prepaid phone cards or phone services,
(12) rebate based businesses,
(13) up-sell merchants,
(14) bill payment services,
(15) betting, including lottery tickets, sports related gambling, casino gaming chips, off-track betting, and wagers at races,
(16) manual or automated cash disbursements,
(17) prepaid cards, checks, insurance or other financial merchandise or services,
(18) sales of money-orders or foreign currency,
(19) wire transfer money orders,
(20) high-risk products and services, including telemarketing sales,
(21) automated fuel dispensers,
(22) adult entertainment oriented products or services (in any medium, including internet, telephone, or printed material),
(23) sales of (i) firearms, firearm parts or hardware, and ammunition; or
(ii) weapons and other devices designed to cause physical injury
(24) internet/mail order/telephone order of age restricted products (e.g., tobacco, alcohol),
(25) occult materials,
(26) hate or harmful products,
(27) escort services, or
(28) bankruptcy attorneys or collection agencies engaged in the collection of debt.

Wow. That is a long list.  

Most people never take the time to read terms and conditions.  We make a habit of it so you don’t have to 🙂

To be clear – this is a list of business practices that allows Square to close your account, with zero notice.

Look closely at numbers 6, 13, and 20, anything seem unusual about those?

Selling an online membership with a monthly recurring billing?
How about an offer for an upsell in your sales funnel?
Ever had a spike in chargebacks or an affiliate send bad traffic through your offer?

By these new stipulations, those business models are now subject to closure without notice at Square’s discretion.
The broadness of these restrictions lies in a phrase you have probably heard, but you might not have ever had defined; “high risk”

What exactly is a “high risk product or service”?

As it happens, you aren’t alone in asking that question:

High Risk Square Account Image

The unfortunate reality is that there is no set definition of what constitutes a high risk business, and with many providers their own definition changes over time. What may be totally acceptable at one merchant account provider will get an account shutdown immediately at another.

Even seemingly unrelated outside events can affect a business’ ability to accept credit cards.

One of the largest and most recent examples of this is the First Data IPO.
First Data provides processing for an enormous number of US businesses, however in the weeks leading up to the IPO some businesses with First Data merchant accounts suddenly faced merchant account closure.

In this case, it had nothing to do with  the individual businesses (although a decent number of those businesses happened to be strip clubs), but was a decision to “clean their portfolio” in preparation for their Initial Public Offering.

In the face of potential closures, there are steps business owners can take to better protect their business and hedge against the possibility of waking up one morning to find their merchant account has been closed without warning.

Working with merchant account providers that understand your particular industry is crucial.

Entrepreneurs cannot be expected to be merchant account experts.  They shouldn’t need to stay well informed of all the different member banks, their risk tolerances, preferred industries, and risk mitigation practices in the shifting landscape of payment acceptance.  Working with providers who specialize in navigating the nuances of online credit card processing, who are experienced and well regarded by others in your industry can take that burden off your shoulders.

Unbiased third parties (like Easy Pay Direct) are a great way to simply get information to help you make informed decisions – or provide a done for you solution with the right merchant account providers for your industry.

We’re always here to make things easier.  🙂

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