Free vs Lease vs Purchased Terminal
This is a very common question that’s brought up when people are shopping around for credit card processing. Let’s break it down so you can make the best-informed decision for your business.
You need equipment to be able to accept credit cards as payment for your goods or services. Whether you’re a single location, single cash register business requiring just one counter-top terminal, or a multi-site, multi-location business in need of many counter-top terminals, a few mobile-attached terminals, and a full POS system, you need the equipment to make it all work.
Beware of Leasing, this is the Worst Option
Some credit card processing companies allow you to lease, or rent, a credit card machine. This allows merchants to pay a monthly fee in order to utilize the machine; the fee itself may range depending on the company.
Leasing is always the worst one of all probable choices for obtaining your processing hardware. This is very tempting if you’re trying to minimize expenses since it requires no up-front costs. However, the total cost of a lease over the life of the lease term will far exceed the cost of buying your equipment. Most providers who offer leased equipment will sign you up for a long-term contract that is completely and utterly cannot be canceled.
Most providers who often use independent leasing companies to provide the equipment will not let you out of your lease early under any circumstances. Regardless of your reasons for deciding to break the lease, you will be held liable for all remaining payments due under the lease if you try to break it. Even returning the leased equipment will not get you out of your lease.
If you’re even remotely tempted to lease your equipment, multiply your monthly lease payment by the number of months in your contract. That’s how much your lease will cost you. We can guarantee that the amount will be several times more than the cost of buying the same equipment outright.
Let’s imagine you decided to rent a machine for $30 a month and you are locked into a 3-year contract. There are 36 months in 3 years, so simply multiplying $30 by 36 months and you’re looking at a terminal that would cost you $1080! That’s a far cry from just $200. And you may not even own that machine per your leasing agreement—you could be paying $30 every month for the lifetime of your processing agreement!
This is how bad of an idea equipment leasing is for your business. There are a couple of points you need to be aware of before signing any terminal lease: 1) ownership rights 2) proprietary issues.
Read the terminal leasing agreement – are you simply renting each month or are you paying off the terminal in installments? The main question you need to ask is will you own the machine? Also, is the machine proprietary? In other words, will it only work with a certain credit card processing company? If you decided to switch credit card processors, can you still use that terminal?
Free Credit Card Machine: Nothing is Free.
Free terminals are never free. Companies offering free terminals are making up that money somewhere else in your agreement, either through fees or surcharges that can really add up. Free terminals can also be proprietary, meaning that you could decide to switch processors and find that those free terminals can’t be used with any processor other than the one that provided them. Don’t fall for a “free terminal” offer. It will cost you.
Some payment providers offer new merchants the option of either buying their equipment outright or including a “free” terminal with their account. If you buy your own equipment, you’ll be on a month-to-month contract with no long-term commitment and no early termination fee (ETF). However, if you choose to take advantage of the “free” terminal offer, you’ll have to sign up for a long-term contract and accept an ETF as part of your agreement. While this is a more reasonable arrangement than leasing, we still believe that, in most cases, you’ll be better off in the long run if you buy your own equipment.
Buying a Terminal?
The easiest way to equip your business with a terminal is simply to buy one. You can purchase a terminal from either your merchant services provider or through a third party. Some people shy away from purchasing a terminal for fear of the potential high cost. The truth is, purchasing a credit card terminal outright can save you hundreds or thousands versus simply renting – best of all, you know you own the terminal and may take it wherever you please. Depending on the terminal model and specifications, one can run you anywhere from $100-$400. On average, a standard credit card terminal may cost you $200 or less.
Most merchant services providers – even the ones that aggressively push the leasing option – will sell you a terminal if you ask. Credit card machines purchased through your provider are generally more expensive than just buying one on Amazon, but they come pre-programmed to work with your provider’s processing network and may include a guarantee or insurance plan to protect your equipment. If you choose to purchase your credit card machine from a third party, you’ll usually pay a lower price for it. However, you’ll have to have the terminal reprogrammed to work with your provider. While some providers offer this service for free, others charge as much as $100 per terminal for it. You’ll also want to select a terminal that’s compatible with your provider’s network, as not all terminals are compatible with every provider.
The bottom line is that you are always looking to make the best financial decision for your business. Do not be lured by promises of free terminals or low monthly rental fees without understanding the terms and the cost.
FREE TERMINAL – Nothing is Free.
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