Free Credit Card Processing: The Only Free Cheese Is In A Mouse Trap
Free credit card terminals
Free credit card machines.
Free credit card processing.
Free, free, free.
Well, if everything is free, how do they make money?
We live in a capitalistic society. Millions of Americans open businesses every day and operate businesses everyday to make money.
If they don’t, if a business operates at a loss, they might as well not be in business.
The simplest definition of a business is to act of commerce in order to earn a profit.
So, if a business is actively selling you a product or service that is totally, absolutely free, you should be concerned and ask yourself,
“If they are giving me this free, what will I pay for by signing up? Why do they want my business if there is no profit incentive for them.”
In the merchant services industry, there is a very deceptive marketing tactic that promises small business owners almost everything for free.
Free equipment, and free or below cost credit card processing.
Well I know this business.
I know that every Visa, Mastercard, American Express or Discover transaction has a cost to it that is levied by the credit card brands.
Every single card and every single transaction.
I know the cost of interchange and the associated fees of transfering money from the consumer to the business owner, security, PCI, etc.
I cannot figure out how these “organizations” can offer all of these “free” products and still stay in business…unless, what they are selling is not free.
Well, if that’s the case, you should run as far away from that “company” as fast as possible, because if they will lie to you before you are a customer, how are they going to treat you once you become one.
Here’s what I mean.
I was speaking with a business owner yesterday and we were discusing his merchant account. Yes, I was pitching him.
So I say to him “Robert, what are you being offered, We are the best processor for your business.”
Robert: “XYZ merchant services is giving me a free Nurit 8000 wireless credit card machine, with 1.00% processing for all transactions and no other fees.”
I say, “Robert that’s not possible. They are quoting you pricing under interchange. What other fees did they quote you, there has to be something else you are leaving out.”
Needless to say, I explained to Robert that is not possible and told Robert to have that sales Rep put the quote in writing on company letterhead, which the Rep was unwilling to do.
Here is an example of a shady merchant account rep playing on Roberts emotions. Robert wants to get the best and lowest price deal he can find, and he thought he found it. The only problem is, it was a lie.
Keep this in mind when shopping for a merchant account.
Merchant Account providers are not equipment manufacturers and they do not get the equipment for free. They have to pay for it.
New equipment from manufacturers such as Hypercom, Verifone, Ingenico, Exadigm, etc cost anywhere between $250.00 for an entry level terminal to upwards of $800-$900.00 for a multi functional wireless terminal.
And that is cost.
If a merchant account sales person tells you they will give you equipment for free, that means they are willing to be in the hole for at least $250.00 to sign you.
They would not do that if they weren’t confident their pricing structure and or terms that they would recover that amount and them make a profit. Merchant account pricing structures are usually very thin, so for that company to break even on $250.00 would either take years or they have very bloated pricing with iron clad cancellation fees upwards of $400-$600.00.
If any business is offering you anything free, understand it is not free and you will absolutely positively pay for whatever was “free” some other way. Chances are you will pay more for it on the backend after you’ve accepted the “free” product, than if you would have paid for it upfront.
Think a “free” cell phone with a 2 year contract, or a phone without a contract. If you are willing to abide by the “free” terms, go ahead. Just remember, you usually give up more than you realize. The only free cheese is in a mouse trap. Don’t get caught.