"Free" Credit Card Machines for Small Business: What's the Catch?

By the MTech Distributors team

A rep walks into your shop. "We'll give you a brand new credit card machine. Free. No cost to you." Sounds great. You're busy, the old terminal is slow, and free is free, right?

Here's the thing: nobody hands out free hardware out of the goodness of their heart. That terminal is getting paid for. The only question is how, and whether you'll find out before or after you sign.

How does a "free" credit card machine get paid for?

There are really only a few ways, and most free offers use at least one:

• Higher processing rates. The cost of the machine gets built into a higher percentage on every swipe. You pay for it over and over, long after it's paid off.

• A long contract. Three years, sometimes more, with an early termination fee if you leave.

• Monthly fees. A "terminal fee," "equipment fee" or "service fee" that shows up on the statement every month.

• A lease you didn't realize you signed. This is the big one.

What's the credit card machine lease trap?

Some "free" or "no money down" terminals come with a separate equipment lease, often with a third-party leasing company, not your processor. It's usually tucked into the same stack of paperwork.

Here's why it hurts:

• The lease is often non-cancellable. Switch processors, close the business, the machine breaks: you can still owe every remaining payment.

• It can run for years. Forty-eight-month leases are common.

• It can cost far more than the machine. A terminal you could buy for a few hundred dollars can end up costing thousands over the life of the lease.

• Leaving your processor doesn't end it. The lease is a separate contract with a separate company.

We meet owners every month who are still paying for a terminal sitting in a drawer.

What about "free credit card processing"?

When someone says "free processing," they almost always mean a cash discount or dual pricing program. The processing still costs something. The difference is the card price covers it instead of your margin.

That's legit when it's set up right: both prices posted, proper signs, compliant for your state. It's a problem when it's set up wrong, like a surprise fee at checkout, or when the "free" program comes bundled with a lease and a three-year contract.

5 questions to ask before you take a free terminal

• Who owns the machine? Me, the processor, or a leasing company?

• Is there a lease anywhere in this paperwork? Ask them to point to it.

• How long is the contract, and what does it cost to leave early?

• What's my rate, and what is it without the free machine? The difference is what the machine really costs you.

• If the terminal breaks, who replaces it and how fast?

If the answers are vague, walk away. A good offer still looks good in writing.

What does a fair deal look like?

• You know who owns the hardware.

• No lease, or a lease with clear terms and an exit.

• No contract, or a short one with no surprise cancellation fee.

• A rate you can actually see on the statement.

• A real person who answers when the terminal goes down on a Saturday.

Already stuck in a terminal lease?

Don't stop paying. Missed payments on a lease can go to collections. Instead, pull the lease agreement, find the leasing company's name, the end date and the buyout terms, and get the payoff amount in writing. Then you can figure out whether it's cheaper to ride it out or buy it out.

Quick answers

Is a free credit card machine really free? Rarely. The cost usually comes back through higher rates, monthly fees, a long contract or an equipment lease.

Can I cancel a credit card machine lease? Many terminal leases are non-cancellable. Read the lease itself, not just the processing agreement.

Is it better to buy or lease a credit card terminal? For most small businesses, buying costs far less over time.

What is free credit card processing? Usually a cash discount or dual pricing program, where the card price covers the processing cost.

Find out what you're really paying

Not sure if there's a lease hiding in your paperwork? Send us your agreement and your last statement. We'll find it.

Send us one recent statement. We'll show you your real rate, where the padding is, and exactly what you'd keep with dual pricing. No contract, no cancellation fee, and a real person on the phone.

Call 888-411-7583 or get your free savings quote.

MTech Distributors has helped 5,000+ businesses across all 50 states since 2017.