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Free Credit Card Terminal Programs – Good or Bad for your Bottom Line?

Free Credit Card Terminal Programs-Are They Truly Free?Free credit card terminals sound appealing, right? After all, who wants to shell out the cash to buy or lease a new credit card terminal? I’m sure you’ve heard the saying “There’s no such thing as a free lunch.” Well there’s no such thing as a free credit card terminal program either. There is always, I repeat always, a “gotcha.”

Let’s break down how these free credit card terminal programs really work, and how they are bad for your business’s bottom line.

“Free” really means Fee

Of the free terminal programs I have investigated, here are examples of what I discovered actually happens:

Scenario #1

Batch Fees – at the end of each business day, when you settle (or batch out) all the completed transactions to your acquiring bank for payment, under the “free” terminal program, you are charged a $0.35 batch fee (or more). That’s $10.50 per month ($0.35 x 30 days) or $126 per year. If you weren’t on a free terminal program, you likely wouldn’t even be charged a batch fee.

Higher Transaction Fees – in this scenario, the credit card processor adds a transaction fee surcharge to each and every transaction. You probably won’t see this itemized on a merchant services proposal because it is assessed by the credit card processor to the merchant level salesperson. He or she in all likelihood is passing that surcharge through to you as an inflated fee per transaction. In the programs I analyzed, this was typically an additional $0.03 per transaction. If you process an average of 500 credit card transactions per month, you can say hello to an extra $15 per month or $180 per year in extra fees.

In this scenario, you would pay an extra $306 EACH AND EVERY YEAR for a supposedly free credit card terminal.

Scenario #2

Batch Fees – this free terminal program also features a $0.35 batch fee (or more). That’s $10.50 per month ($0.35 x 30 days) or $126 per year. Remember, many credit card processors typically don’t even charge batch fees.

Annual Fee – the credit card processor charges a $79 annual fee. This is the minimum fee and represents the break-even cost to the merchant level salesperson. The reality is that the annual fee is far above $100 because the merchant level salesperson wants to make a profit too. If the annual fee happens to be less than $100, be on the lookout for a plethora of vaguely described one time and/or monthly fees on the merchant application and in the fine print of the terms & conditions.

In this scenario, you are destined to pay at least an extra $205 EACH AND EVERY YEAR for your “free” credit card terminal.

Merchants pay $918 to save $99

The extra cost of Scenario #1 over a three year term (not an unusual length of time) is $918! In Scenario #2, the extra cost is $615, it’s less, but yikes! Why on earth would anyone pay that much more under the guise of a “free” program when you can often buy the identical credit card terminal from the same merchant services provider at a $99 purchase price?

Want to Change Processors? Good Luck!

Let’s say you were already enrolled in a free terminal program before reading this article and you decide to switch to another credit card processor to receive better customer service, to take advantage of lower credit card processing rates, etc. You may be in for a rude awakening.

Another dirty little secret of some “free” credit card terminal programs is proprietary software and/or hardware. Some merchant services providers collaborate with credit card terminal vendors to create proprietary versions of terminal software and encryption that are compatible with only that particular merchant services provider.

What it means is that when your new provider goes to reprogram your credit card terminal, you won’t be able to use it. You once again need to purchase, lease (gulp), or heaven forbid enroll in the new processor’s free terminal program.

Free Credit Card Terminal Programs are Bad for Your Bottom Line

Clearly there is nothing free about “free” credit card terminal programs. In reality they will cost you hundreds of dollars in extra fees each and every year. Don’t be swayed by the siren song of a free terminal. Remember, most of the free terminals can be purchased new for $99 - $125; that works out to a cost of only $0.27 - $0.35 per day over the course of a year. Heck, if you keep your eyes open, you could pick up that amount of change just by walking down the sidewalk!

Are You Ready to Think Simple?

Simple has generated thousands of dollars in annual cost savings for businesses. Our comprehensive cost reduction analysis is performed on contingency, which means Simple is compensated only if cost savings are identified for your business. Imagine what you could do with all that money added to your bottom line…

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