By simply typing "merchant account" into a google search page, many advertisements for FREE credit card terminals flood your results screen. Are these terminals really free? The answer is yes and no. These "free" terminals are typically provided on a loan basis. You keep the terminal for as long as you process with the company who loaned it to you. Free terminal programs are not necessarily bad, they are typically best for start up companies and new businesses who do not have the cash flow to purchase a terminal up front. Free terminal programs are certainly better than lease programs that tie up a business into a non cancellable lease.

So what's the catch? Typically, the fee structures of free terminal programs are higher than if you purchase the equipment outright or if you reprogram existing equipment. Below is a side by side comparison of the differences between a typical FREE terminal program vs. a program where you either purchase or already own equipment.

Typical FREE Terminal Rates/Fees:
Qualified Rate: 1.69% - $1.79%
Mid Qual Rate: 3% - 5%
Non Qual Rate: 3% - 5%
Transaction Fee: $0.25 - $0.30/transaction
Batch Header: $0.35/batch
Monthly Basic Service Fee: $10/month
Monthly Minimum: $25
Annual Fee: $79/year (Typically covers next day replacement of terminal)
Contract Term: 36 Months

Equipment Purchase/Reprogram Rates/Fees:
Qualified Rate: 1.59% - 1.69%
Mid Qual Rate: 2.2% - 3%
Non Qual Rate: 3% - 3.5%
Transaction Fee: $0.20 - $0.25/transaction
Batch Header: $0.00 - $0.25/batch
Monthly Basic Service Fee: $5 - $10/month
Monthly Minimum: $0 - $25/month
Annual Fee: $0 - $15/year
Contract Term: Variable

After doing research on both types of programs, you can see that Free terminal programs typically cost more on a per transaction and monthly basis than if you were to purchase the equipment outright. Free terminal programs are not necessarily a bad program, it just depends on what type of cash flow the business has at the time the account is opened. Just be sure to know all fees associated with the account before you sign for a "free" terminal with a credit card processing company.

Oliver Mupas
866-207-6007 ext303
omupas@ubcnetworkonline.com