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Amazon's Credit Card Reader Is Here, And It's Dramatically Cheaper Than Square

Square charges 2.75% for each transaction; Amazon charges 1.75%.

Amazon's Credit Card Reader Is Here, And It's Dramatically Cheaper Than Square

[Images courtesy of Amazon]

Amazon already has your credit card stashed away online. Now it wants to process the swipe transactions you make throughout your day. Like Square and PayPal, Amazon announced its own plastic credit card reader early Wednesday morning called Amazon Local Reader. It has one big competitive advantage (and one that follows in the grand Amazon scheme): It dramatically undercuts the competition.

Whereas Square and PayPal skim 2.75% and 2.70% off every credit card transaction, respectively, Amazon will charge a full percentage point lower—it's 1.75% per transaction until January 2016, when it will go up to 2.50%. The money is deposited into your bank account the next day.

Local Reader is compatible with iPhones and iPads, Samsung Galaxy Phones, and the Kindle Fire tablets. There is, however, one glaring omission from the devices listed: Amazon's ambitious new Fire Phone. (For what it's worth, the company says compatibility with the Fire Phone is "coming soon." But it still strikes me as odd that Amazon would launch a new product without interoperability from the get-go.)

Handling vendor transactions is an increasingly cutthroat game, and not an entirely lucrative one. While Square's flat rate was innovative for untangling it from the industry's secret cost structure and hidden fees, the company's margins are razor-thin—70% or more of each transaction goes to security and fraud protections. As one former credit card executive told Fast Company recently: "If your business model is based on making pennies from transactions, you're in trouble."

Then again, if any company knows how to make do with lackluster margins, it's Amazon. Learn more about the new Local Reader here.