Square vs. Shopify: Which Is Right for Your Business?

Square and Shopify offer payment processing services that support in-person and online sales and include point-of-sale, or POS, software features. The main differences between Square and Shopify are pricing, contract requirements and features. Although Shopify might be better suited for focusing on e-commerce sales, Square offers more flexibility.

Here's how they compare.

Square

• More robust POS features. Because Square doesn't determine which features you can use based on a chosen plan, it offers more robust POS features for free.

• No monthly fee. By only charging processing fees, Square is likely cheaper for many businesses.

Shopify

• An online store is available in all plans. Shopify includes features for online stores in every plan, so you don't have to worry about paying extra for that option.

• Scalable plans. With multiple plan options, owners can scale their businesses without worrying about losing the features they need. They can move up to the next plan to take advantage of more features.

• Cheaper processing rates are available. For example, Shopify's more expensive plans come with cheaper processing rates to save businesses money if they need the full gamut of features.

» MORE: How much are credit card processing fees?

Square

• Extra cost for online store features. Square requires businesses to choose a plan to use their online store options. There is a free plan, but the features are limited.

Shopify

• Variable processing fees. Not all businesses pay the same processing fees, meaning companies that can pay for more expensive plans will pay less per transaction.

Square POS software

Square's POS lets you accept all major credit cards and digital wallets, including Apple Pay, Google Pay and Samsung Pay. Moreover, there is no monthly fee or a required contract. Instead, Square charges a processing fee for every transaction, and the rate depends on the type of transaction.

Square offers transparent pricing and only charges your business when you make a transaction. Its rates are broken down into categories:

» MORE: How to accept credit card payments

Square hosts a cloud-based POS system, which means all its features are accessible anywhere with an internet connection. You can sign into the POS system from any device, including an iOS and Android smartphone.

Many of Square's POS features are free, but the price of POS add-ons depend on the chosen feature and plan. The more a feature is used, the higher the monthly charge.

• Loyalty rewards. Plans range from $45-$105 per month per location. Create a custom loyalty program to reward repeat customers.

• Email marketing. Plans range from $15-$40 per month (higher if more than 2,000 customer contacts). Create custom emails and track how customers interact with them.

• Payroll management. For the contractors-only plan, it's $5 per month per contractor. The plan for contractors and employees is $35 per month plus $5 per month for each person being paid. Payroll management allows you to track employees' hours, process payroll, file taxes and more.

»MORE: Best payroll software for small businesses

Square's POS offers free features, such as reporting, team management and inventory management. Some of these features are all-inclusive, while others have paid plans that provide more flexibility. With the free features, you can:

• Accept and track transactions.

• Process payments in offline mode.

• Send email or SMS receipts or print receipts with available printers.

• Create discounts and limited-time offers.

• Keep track of customers in a directory.

• Accept online transactions with e-commerce stores.

• Customize and export sales reports.

• Manage inventory with stock alerts and integration options.

• Utilize third-party app integrations like QuickBooks and Wix.

» MORE: What is Square?

Square e-commerce

Square users can use an ecommerce website builder called Square Online to create an online store.

Square's website plans include a tiered pricing structure that adds features onto each tier — so the more you pay, the more you get. The Square Online plans charge a monthly fee and include a free option.

Square Online uses a website builder that doesn't require coding experience, and businesses can even connect with platforms like Instagram to sell their products on social media. It also allows customers to choose a buy-now-pay-later option when checking out on websites.

Square POS hardware

Square offers five types of hardware that vary in their capabilities and are available for all sizes of businesses and budgets, including:

Each works with its free POS software, but they differ in which types of credit cards they accept, handheld or countertop design and which features they include:

• Reader for magstripe. This reader only swipes magstripe credit cards and connects to a smartphone through a headphone jack or Lightning port. It requires you to use the Square App to process payments and doesn't need to be charged.

• Reader for contactless and chip. This reader only accepts chipped credit cards, contactless payments and digital wallets. It connects to a smart device by Bluetooth and uses the Square App to run transactions. Square also offers Tap to Pay on iPhone, which lets merchants accept card payments using only a regular iPhone with the Square POS app. Customers hold their cards or their own iPhone wallets near the merchant's phone to pay.

• Square Stand. Connecting a tablet with the contactless and chip reader lets this system accept all types of credit cards along with scanning QR codes with the Square Cash App. It also swivels to allow customers to use the screen and can be mounted onto a counter.

• Square Terminal. As a handheld design with a countertop dock, this model accepts all credit cards and digital wallets. In addition, it prints receipts and can be connected to a tablet for a second screen.

• Square Register. This reader offers two screens so customers can see transaction details and accepts all payment types, including QR codes with the Cash App. It mounts onto a countertop for a complete register experience, but it doesn't print receipts or scan barcodes on its own.

» MORE: What is EMV? What businesses need to know

Shopify software

The payment processing fees depend on which Shopify plan you have.

Like Square's POS, Shopify's cloud-based POS system lets businesses access their dashboard via smart devices as well as a desktop computer. You can sign in to the POS system on iOS and Android smartphones.

Its base plan, called Shopify POS Lite, provides the following features:

• Add the "Buy" button to your website to sell through your Shopify Payments plan.

• Accept credit card and digital wallet payments on the go and in person.

• Create invoices to send to customers and get paid by email.

• See financial reports.

• Create customer profiles

• Manage orders and products for limited inventory.

• QR code details for products.

• Issue gift cards.

• Split customer bills.

• Create customer discounts.

Among Shopify's other paid plans, additional features include capabilities to:

• Schedule local pickup and delivery.

• Create purchase orders.

• Receive low stock alerts.

• Run an analysis of inventory and create detailed inventory reports.

• Require manager approvals and create staff permissions depending on their roles.

• Create custom-printed receipts.

• Run daily sales reports.

» MORE: What is Shopify and how does it work?

Shopify e-commerce

Shopify includes e-commerce features in every plan, so there is no additional cost for an online store. Shopify Online Store lets you build a customized website. Like Square, it uses a simple builder that doesn't require coding. Customers can pay online, and transactions are processed through Shopify Payments. And businesses can integrate their online store with over 6,000 apps, including social media platforms, to boost their sales.

Shopify POS hardware

• Chipper 2X BT Reader. This reader is compact and lets you tap, insert and swipe credit or debit cards. It also accepts Apple Pay and Google Pay. Because it connects to a smart device through Bluetooth, you'll need a compatible iPhone or iPad to run transactions. You also need Shopify Payments enabled to accept payment cards with this device.

• Retail Kit. This iPad stand and card reader combo accepts chip and contactless payments is a countertop system.

• POS Go. This handheld mobile device has a card reader and barcode scanner. The case provides protection and a hand strap.

• Tap to pay on iPhone. This is a payment acceptance capability that allows businesses on Shopify POS to accept contactless payments directly on an iPhone. This is currently built into Shopify POS software. It does not work on iPads.

If you want more POS features and credit card reader options and aren't concerned about having a lot of flexibility to build an online store, Square might be the best option for you. But if you want to focus on e-commerce sales and add more features as your business grows, you might want to go with Shopify.

Clover

Payment processing:

Why we like it: Clover accepts credit cards and contactless payments; it lalso offers small businesses a variety of card reader options for every budget, including the handheld Clover Go and the countertop Clover Station Duo with two screens. You can integrate Clover into your existing website or work with Clover to build a new one for online sales. Its POS includes business-driven features, such as sales tracking and reporting, inventory and order management and a web-based dashboard.

» MORE: NerdWallet's best point-of-sale (POS) systems

Stripe

Payment processing:

Why we like it: Stripe offers online and in-person payment processing and has hosted checkout to make the e-commerce experience more flexible. It also lets you set up recurring billing and send invoices. It has one proprietary card reader but works with four other models to give you flexibility, with prices starting at $59. Stripe's POS is limited compared to competitors, but it offers small businesses reporting features, QuickBooks integration, 24/7 support and a Developers Dashboard for customizations.