The right credit card terminal will help you achieve lower rates and protect your business from fraud. It would be silly to opt against using one if you take in-person transactions, so the vast majority of business owners do.
Unfortunately, some unethical Merchant Account Providers take advantage of this must-have mentality and lock businesses in with lengthy, expensive leases for credit card terminals.
3 Reasons to Avoid Credit Card Machine Leasing Companies
We've identified three major problems with terminal leasing for your merchant credit card processing:
- Credit card machine leasing companies falsely advertise this option as cost-effective.
Unethical providers offer two options for terminals: purchase or lease. They sell the terminal at an inflated cost or offer a lease with low monthly payments. Facing an expensive purchase price, you’re more inclined to lease because it seems like the better short-term option for your bank account. Unethical providers end up charging you more than what you’d pay to purchase the terminal when the length of the lease is taken into consideration.
The true cost for terminals varies from $150 to $500, depending on the level of technology. When you lease, you’re charged between $20 and $40 per month. With lease lengths ranging from two to six years, you’re left paying anywhere from $960 to $2,880 for the terminal. That’s potentially 20 times the true cost of a terminal.
- Credit card machine leasing companies trap you into paying for a terminal you no longer need.
If you choose to switch providers or your business closes or is sold, you’re stuck paying for the terminal due to the binding terms of the lease. Unethical providers’ failure to mention lease lengths is two fold: Along with earning an incredibly high profit, they guarantee themselves a fixed income from your account. If you choose to discontinue using that provider, it still makes money off of you.
- Unethical providers auto-renew terminal leases.
It’s common for credit card machine leasing companies to sneak in auto-renew clauses. Unethical providers love to add them into busy and confusing lease terms — since most business owners don’t read through every single term, providers know they’ll likely miss this unsavory condition.
You have a few options if you choose to break a credit card machine lease:
- Pay the remainder of the lease and give notice to ensure you aren’t auto-enrolled in a new lease. It’s the least cost-effective choice, but it guarantees you’ve cut financial ties with the provider.
- File a lawsuit against your provider. It’s not uncommon to file a lawsuit if your provider failed to mention any lease terms. As detailed in one lawsuit, an unethical provider pushed businesses to enter into credit card terminal leasing contracts despite the fact that its terminals were advertised as free.
- Refuse to pay. Like refusing to pay an early termination fee, your business can be blacklisted on the Terminated Merchant File, tracked down by collections agencies and suffer credit damage if you refuse to pay terminal lease fees.
Of course, none of the above are ideal. Luckily there are ways to avoid terminal credit card machine leasing companies altogether.
Never Lease a Credit Card Machine Again
Avoiding credit card terminal leasing takes a bit of work but is worth the savings. Here are some best practices for avoiding terminal leases:
- Choose a provider with month-to-month terminal rentals. No long-term contracts or payment plans, just easy monthly payments for a terminal you can stop using at any time.
- Purchase a terminal that is reliable and future proof. Purchasing means a one-time payment for a terminal that’s yours to keep. Purchase a terminal that can adapt to future changes in technology.
- Work with a provider that qualifies businesses for free credit card machines. Certain providers understand the hassle that comes with terminals and want to make sure they earn your business, fair and square. Of course, confirm the terminal is truly free by reading through all merchant account terms.
Unethical providers leverage terminal leases as an income source, failing to put the best interests of their customers first. Don’t jump at the opportunity to lease a terminal because it seems cost-effective; it’s actually the more expensive option. Take the time to research options when it comes to your merchant account equipment; your bank account will thank you.
Have you ever dealt with unethical credit card machine leasing? How long were you stuck with the terminal? Tell us about it below; we’d love to hear from you.
Editor's Note: This post was originally published in January 2017 and has been updated for comprehensiveness and accuracy.