Working with business owners since 2006, the one thing that trips up most people opening up a new merchant account is the credit card terminal lease.

Let me explain.

For starters, credit card terminal leases are non-cancelable. That means you can’t cancel them. And since the typical lease term is 48 months, it means you are stuck overpaying for a credit card terminal for 48 months.

And don't think they just automatically expire, either. You have to remember to call up and cancel, provided you remember to call up the company to stop your monthly payments.

What's worse, nine times out of ten they’ll ask for the credit card terminal back. You can't even make this stuff up.

So what does this mean? Well, four years and a couple of thousand dollars later, you're right back at square one, needing a new credit card terminal... again!

And wasn’t that what you were trying to avoid in the first place. Now, you might be asking yourself, "so why do people end up signing a lease?"

Three Credit Card Terminal Lease Traps

To understand why do many people end up with a credit card machine lease, rather than buying the equipment, there are three factors to consider.

One. In my experience the majority of people signing a lease are in the process of opening their first business. Or the are accepting credit cards for the first time.

When this happens, their concern and focus is on opening a merchant account as quickly (and cost effectively) as possible. The focus is on the grand opening (for new businesses).

Or many of their customers are asking them to accept credit cards (yes, this does happen).

When this happens, time is the critical factor. And this means NOT reviewing contracts, reading the fine print, or going through a list of questions with the sales rep.

Two. The next “lease trap” occurs when people fail to understand that accepting credit cards is more complicated than they might think.

Here's what I mean. What do you think the most asked question in the industry is? Have an idea?

Well, it's..."what's your rate?"

Now, here's a question for you. If you have a retail location (spa, restaurant, store, etc.) and accept cards in person, do you know how many rates apply to that kind of business?

It could be 3, 4 or more, depending on the pricing model.

Yet, time and again I hear people ask about "rate," as if there's just ONE rate.

So with that in mind, how many people do you think read the fine print of service agreements or contracts? Very few people. And most sales reps know this.

Their goal is to get you to sign on the dotted line.

It’s about THEIR best interest, not yours. And that takes us to number...

Three. This point involves what I call the “psychology of pricing.” Here's what I mean: what sounds like or seems like a better deal to you, $700 out of your pocket right now, or $39 a month?

Now, forget for a moment that most people hate math. I should know, since I'm a former high school math teacher (no, I'm not making that up). If you’re like most people, the second price point SEEMS like a better deal. Hey, it even looks better on paper. Which is why we’ll discuss…

The True Cost of Credit Card Terminals

Ultimately, lease programs can only be sold to someone by hiding it in a contract for merchant services (this does happen), or by finding a way to "hide" the true cost of the lease.

In either case, we're talking about hiding something. So how does this work?

Well, the first strategy is easy enough to find. If you look at all the places the sales rep asks you to sign and/or initial, just look to see if there's a box that says something like "non-cancelable" or "48 month term" and you've uncovered the first trap.

In the second case, here's how it works. First, they'll over inflate the price of a credit card terminal. Often the cost is disclosed as $500, $600 or more. Then, they'll focus attention on the "reasonable" monthly fee.

Add to this the line of "no out of pocket expenses” and you can see how easily this plays out.

Do a little digging online, and you'll find that most credit card terminals will wholesale for around $200.

And if you still don’t want to put up any money for “your own” terminal, lots of providers have free equipment programs (we have one as well).

The cost for not doing your homework may shock you. A typical lease is 48 months. Figure that the "typical" fee is anywhere between $29 to $49 per month, and the real COST for the lease is anywhere between $1392 and $2352.

Bottom line, not all companies are the same. And there’s more to accepting credit cards at your business than most people know. Or want to know.

The Next Step

So what can you do?

Well, if you found this information useful, or have a question, please leave us a comment below.

You can also check out our merchant account provider website as well. Here's what you'll find if you stop by:

• informative articles,
  
• you can request a free merchant account review (if you already accept credit cards),
  
• learn about or free equipment programs,
• download free reports to assist you in the process of finding the right merchant account provider.
  

If you found the hub helpful, please leave a comment here, or on our website. And if there's another topic you'd like to learn more about, let us know.