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.
We've identified three major problems with terminal leasing for your merchant credit card processing:
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.
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.
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:
Of course, none of the above are ideal. Luckily there are ways to avoid terminal credit card machine leasing companies altogether.
Avoiding credit card terminal leasing takes a bit of work but is worth the savings. Here are some best practices for avoiding terminal leases:
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.