A Simple Swipe on a Phone, and You’re Paid

It’s always thrilling when somebody looks at the Way Things Have Always Been Done, and then asks: Why?

And then goes on to change the world forever.

1967: Why is it necessary to wait in line for a human teller if all you want to do is withdraw cash?

1974: Why shouldn’t your document on the computer screen look the same way it will when it’s printed?

1991: If shampoo always settles to the bottom of the bottle, why is the cap on top?

Recently, a San Francisco company has been asking an equally groundshaking question: Why can’t everyone accept credit cards?

Look, credit cards are great. There’s a paper trail, there’s fraud protection, there’s incredible convenience — just swipe and go. But why is it that only companies accept them?

Why can’t we use them to pay the piano teacher, the baby sitter, the lawn-mowing teenager, even first graders at their lemonade stand? Why aren’t credit cards accepted at garage sales, food carts and PTA bake sales? Heck, when your tipsy buddy wants to borrow $20 for a cab home, why can’t you eliminate the awkwardness and future conflict by just running his Visa card on the spot?

“Well,” you’re surely spluttering, “because — well, just because! That’s just how it is. Only actual companies take credit cards, everyone knows that!”

Yeah, but why?

The company asking that question is called Square. Its chief executive is Jack Dorsey, who co-founded Twitter — heard of it? Square is not only asking why, it’s proposing to change that rule for good.

There are actually some good reasons individuals don’t accept credit cards; the whole system is a nightmare of fees and red tape.

To become a credit card merchant, you have to buy the card-reading equipment, which costs several hundred dollars. You generally pay a setup fee, and you commit to a one- or two-year contract with the processing company. You pay $15 to $25 a month, and minimum transaction fees of $25 a month, even if you had no sales at all.

The Square Up system, on the other hand, eliminates that stuff. All of it. It makes the barrier to entry into the credit card world so low, there’s virtually nothing to stop you, the little guy, from taking the leap.

First, the equipment: you need an iPhone, iPad, iPod Touch or an Android phone. Why buy a fancy authorizing machine, when you already have a computer in your pocket?

Unfortunately, Apple steadfastly refuses to add a card-swiping slot to the iPhone. So Square provides you with a tiny half-inch reader attachment that snaps into, of all things, your phone’s headphone jack. The reader has a slot where you can swipe a credit card.

(The name Square, of course, refers both to the shape of the little reader and to what it does — as in, “are we square?” Cute.)

The Square plug is free. In other words, not only are you spared the contracts, the minimums and the monthly fees, but your equipment cost is zero. For all Square cares, you can keep your reader in a drawer somewhere and use it once a year.

For each transaction, Square charges you 2.75 percent of the total, plus 15 cents. That’s a lot simpler, and usually cheaper, than actual merchant accounts, where you might pay 3 or 4 percent, depending on the kind of card, plus 30 cents a transaction.

So let’s say someone from Craigslist comes over to buy your old junk. You snap the Square reader into your phone or tablet. You tap in the amount of the purchase; it could be $1 for a yo-yo, $25 for a box of old records or $12,000 for a used car (there’s no maximum amount). You type a description if you like, and maybe even take a photo of what you’re selling.

Now you swipe the customer’s card, which may take you a couple of tries. Your happy customer signs the phone’s touch screen with a finger (a coming software revision will make this step optional). If you like, you can tap in the customer’s e-mail address; the receipt is then sent automatically, complete with a little map showing exactly where the transaction took place.

The software is beautiful and dog-simple. To sign your name, you scrawl with your finger where it says “sign here.” Think you can handle this?