What is the Cost of a Credit Card Machine?
Typically, buying a piece of equipment only requires your initial cost of purchase, this is not the case with credit card machines and terminals. Depending on the terminal model and specifications, a credit card machine can cost anywhere from $100-$400. However, when considering a credit card terminal, there are many more costs associated. Some people shy away from purchasing a terminal for fear of the cost. Understanding the fees and pricing models in addition to the cost of terminal equipment can aid a business owner in budgeting for the right payment processing solution.
Associated Fees with Credit Card Machines
While the credit card machine equipment itself is fairly inexpensive, there are three types of fees that you will encounter when your business accepts credit card payments: transactional, flat, and incidental.
Transactional fees are assessed every time a transaction is run. This represents the biggest cost of operating a merchant account. Flat fees are an additional charge that varies in name and value but will show up on your monthly statement. Incidental fees are only charged per incidence. For example, a chargeback may not happen all the time, but when it does you will be charged a fee.
Other Possible Fees for Credit Card Machine Processing
Terminal fees, whether you lease for a monthly terminal fee, or purchase one outright for a one-time fee.
PCI fees, these are fees paid to the Payment Card Industry, either for noncompliance or compliance. Usually in the case of compliance, making a payment to the merchant provider is to ensure that your business remains in line with regulations.
Fees charged every year to cover the basic use of a provider’s services are known as Annual fees.
If you cancel your contract early you may be charged an early termination fee.
Minimum fees can be charged to merchants who don’t reach a total number of transactions for a month or year. Depending on your provider these fees will vary.
How are Merchant Accounts Priced?
As you probably know, a merchant account is needed in order to process the transactions from your credit card machine. Merchant service providers sell accounts in several ways. Interchange-plus, tiered pricing, subscription & membership, and blended.
Interchange Plus is one of the most transparent pricing models. Offering user-friendly terms and fees. Itemizing fees on your monthly statement, allowing you to see the difference between the various charges with the most understandable terms and fees. Fees are acquired from the card-issuing banks and the credit card association charge for each transaction. A percentage of each transaction is charged along with a flat fee per transaction.
Tiered pricing plans list transactions as qualified, mid-qualified, and non-qualified each ‘tier’ having a set rate. Typically qualified rates are the lowest and increase as the qualifications change. Making sure you understand which tier your transactions are falling into will assist in determining the markup rates. Tiered pricing allows businesses that are processing high volume to negotiate rates based on transaction milestones. Simply put, the more your process the less each transaction will cost.
Subscription & membership pricing models are similar to interchange plus. Merchants with large transactions may benefit from this form of pricing.
Blended price models make the most sense for a small business that does low volume in sales. Similar to tiered pricing but without the tiers. All costs are blended together to create one rate and fee.
It’s all about Transparency
Transparency is critical when choosing the right merchant service provider. Having the rates, fees, and categories explained in detail can ease cost associated anxiety for any business owner.