I've been investigating them very closely and checking user reports. There are a couple of negative issues, either only significant depending on the user.
First thing to understand is that this system is not designed for big-time merchant use. It's designed to allow "everyman" to accept credit cards. So the kids selling Girl Scout cookies or band chocolate can accept credit cards. Even your penny ante poker buddies can collect their winnings by credit card.
That concept carries some benefits and also some compromises. The major benefit is no contract, no stings, no hidden fees. The major compromise is that you can't easily accept more than $1,000 in a seven-day period without Square holding the >1,000 amount for 30 days.
For "everyman," that's not a problem at all. For a serious merchant--even, say, a barber, that's a problem. Square will raise the limit, but that requires an unstated amount of time building a business history that supports the need, as well as a credit check.
Most of us probably could not easily depend solely on Square, and it only takes a couple of major transactions per month to push Square's per-transaction percentage higher than most of us are paying in monthly merchant account fees plus transaction fees.
But a lot depends on how you do business. I find that in my portrait business for some reason the vast majority of clients prefer to pay the major part of the fee by check--I don't know why. About the only time I need to take a credit card is for the intitial booking fee, and then only occasionally.
I suspect, though, that very shortly--possibly before the end of 2011--we're going to obviate credit cards entirely and move money directly between bank accounts on our smartphones.
The other issue is customer support. Again, it's the "everyman" concept--Square's customer support is just about the same as Facebook's and Google's....not much handholding, no personal service representative. You get it as it is.
Yet, Square is so easy and string-free to implement that it's practically a "why not?" proposition even if you stick with your current merchant. And I do like the idea of receipts with the customer's picture on them.