Switch your payment processing and we’ll give you a new state-of-the-art credit card terminal FREE! Sounds like a pretty good deal, doesn’t it? After all, equipment can be expensive, and you’re always looking to save money wherever you can. Have you ever stopped to think if getting a free terminal is just too good to be true?

When it comes to the question of “are FREE credit card terminals truly free”, there is a short answer and a long answer.

The Short Answer

No. (I did say short.)

The Long Answer

No, they aren’t, and here are some reasons why:

Processing companies need to stay in business. Like you (a business owner), they are in the business to make money. How do they make money if they’re giving away terminals, which cost money? The answer? They’re not.

Processors that advertise free terminals hide the price of the terminal inside other fees and rates and requirements, which are increased in order to cover the cost of the terminal itself. Almost always, you end up paying a lot more in the end—meaning that your “free terminal” was not so free after all.

The True Cost of Terminals

There are three tricks to watch out for when signing up for a free terminal. Any or all of these could be applied to your situation.

1. The Bait and Switch.

After your application is partially processed and your credit report is run, putting a ding on your credit score, you are informed that you don’t actually qualify for the free terminal program. This can happen for one of two reasons. First is if your credit score is low, because processors want to ensure they will get their equipment back. The second reason is if you have a low processing volume, because it will take too long for the processor to make up the price of the terminal with their fees. You are then given the option to pay for that free terminal that attracted you in the first place.

Extra fees on your processing bill are never fun, especially the kind that surprise you.

2. Fees Galore.

In this scenario, while you don’t initially pay for the equipment, it comes with a slew of miscellaneous, unnecessary fees, such as a maintenance or insurance fee for the equipment. With almost any processor, some fees are inevitable because that’s usually where the profit comes from to keep the doors open. However, these fees are usually bumped up even higher than they need to be when a free terminal is involved. This can also be done with the rates. Extra high transaction fees and extra discount rates are common.

3. What’s Mine Isn’t Yours.

When you are in a free terminal program, the chances are that somewhere in the fine print, the terminal has to be returned at the end of the term or when the account is canceled. Not only that, but it has to be in the same condition you received it. So if it was new, it better be like new, with minimal damage and scratches. If your machine is deemed unacceptable, damaged, or you don’t return it promptly, you can be charged the full cost of the machine.

To illustrate, here’s some fine print I pulled off of a random payment processor’s website: “Terminal is free with the signing of the FREE X program agreement, which a merchant receives once they fill out a Merchant Credit Card Processing Agreement and are approved to use X as their credit card processor. Merchant agrees that the Equipment is the property of X, is being licensed to Merchant and must be returned in good working condition within ten days of the termination or expiration of the Merchant Account.”

As you can see, it’s easy to get confused and convinced to sign up for a free program because it sounds like a good deal, when in reality, it is quite the opposite.

A Real Life Example

We worked with a merchant who was leery of the payment processing industry. Let’s call her Mary. When we asked Mary why, she told us that with a previous restaurant she owned, a salesman walked in off the street and got her to sign up for the free terminal program with low rates. The terminal Mary received was actually refurbished, and a button ended up getting damaged while she used it. Also, her statements contained all kind of fees she didn’t understand, such as a contract fee. To add insult to injury, the processor hid an extra transaction fee of .03 cents and an extra discount rate of .10% on top of the “low rate”.

When the restaurant had to be closed a year later, Mary was told she had to return the machine. She sent it back, only to be charged the full value of the machine anyway because it was not in the same condition as she received it.

So, a free, new terminal turned out to be not really new, and not really free. Mary ended up paying for it many times over in combined fees and even paid an additional full equipment cost charge at the end. If she had more knowledge and awareness of the industry and had examined the contract, she would have seen the red flags. The thing to remember is this: Really, really read what you’re signing, and ask a lot of questions before you commit. And remember, nothing is really free.

Have questions about the true cost of a terminal and how to get a fair deal? Feel free to reach out to one of our small business specialists at (888) 902-6227 or at info@getvms.com.



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