Anyone who’s been working in a retail environment over the last few years has received the phone calls.  They’re sales calls from companies offering credit card processing services and equipment for merchant accounts.  They all claim to have the best rates, the best tools and the best possible customer support.  The credit card processing industry has become so hyper-competitive that some service providers will even offer businesses a free credit card machine for using their program.  While that sounds like nothing more than a tempting loss leader at first glance, it’s actually much more.  When you find out why those companies offer free credit card machines, you quickly realize that they’re probably the last thing in the world you really want.

Credit card machines aren’t the most expensive appliance in the world.  In fact, some of them are quite inexpensive.  Nonetheless, they do cost enough to make the receipt of a free one sound like a great idea.  That instinct favoring the free new terminal is giving some less-than-scrupulous service providers with a great way to ply their nefarious trade.

The company offers the free machine as part of a service agreement.  While the agreement may look competitive with other options, retailers often fail to recognize the tricks these companies can use to make up for the cost of the free machine and much, much more.
One standard trick is to show the retailer multiple rate points for their transactions.  Fees are higher for some sales than others based on whether the card was swiped or keyed in, for instance.  The gathering of additional identifying information (a ZIP code, for instance) can qualify a retailer for a lower rate than those who don’t secure that information.

What the free credit card machine provider doesn’t tell you is that they’ll look for every legitimate (and, in some cases, illegitimate) reason to downgrade transaction quality.  Thus, when you receive your actual statement—which is often nearly impossible to decipher—you’ll actually be paying a higher processing fee than you initially assumed.

Other companies make their money back (along with fistfuls of profits) by automatically signing up new customers to regular supply orders and service agreements on the new terminal.  More than one company has received an invoice requesting outlandish payments for automatically-shipped supplies like paper rolls and scanner cleaners.  These forced continuity programs are often buried in the fine print of an agreement and their cost can quickly swamp the value of a new credit card machine.

It would be nice if you could automatically assume that all companies offering a free terminal were rip-off artists.  That’s not necessarily the case, however.  In order to keep up with the competition, many reputable companies are also offering new machines to service subscribers.  While the free offer should be a red flag, all business owners are advised to research the individual company making the offer before reaching any conclusions.  If you’re in the market for a terminal or processing service, learn everything you need to know to make a smart decision.

A free credit card machine may sound like a great deal.  In some cases, it may actually be a great deal, too.  In too many circumstances, however, the free machine is simply a come-on for an inferior processing service.