You’ve seen the advertisements. Sign up for a merchant account with XYZ Merchants and receive a FREE* credit card processing terminal! Sign up today for FREE* Tablet POS System! Sounds like a great deal, right? Sounds almost… too good to be true! That’s because, unfortunately, it is.
As any business owner knows, everything costs money. If a business were to purchase t-shirts, for example, and sell those t-shirts for less than the purchase price, they’d likely go out of business (very quickly).
How does that relate to the free terminal? The processor providing the terminal for free had a cost to acquire that terminal. That cost needs to be made up in other ways if they are not charging for the device itself.
With a free terminal or free POS System often comes a hefty early termination fee, strings attached via the inability to effectively switch processors (system dependence) and higher than average total monthly processing fees.
An often overlooked fact that often impacts merchants with the “lowest processing fees” or “free devices” is that processor have built into their agreements that they can increase fees, add fees, adjust or modify fees at any time. The language is required in order to accommodate card brand fee increases or adjustments that can drastically impact a processors bottom line if merchant’s rates are not modified to account for the card brand fees.
However, the language is often used as a carte blanche to increase merchant’s processing fees by significant amounts, up to twice a year. We’ve seen merchants go from 0.06% to over 0.60% in the first 90 days of their relationship with their new processor.
Pricing adjustments as aforementioned are all too common. And the merchants impacted the most are those who are locked in or, got that FREE* terminal or POS system.
The best way to ensure you are getting the best deal is to look at the following:
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