Free Credit Card Machines – Not so much

Seth Godin posted a great blog today referring to how something that appears to be free isn’t always without strings.

This reminded me of the free credit card terminal programs that are going on now. These programs have been catching the attention of businesses and reselling agents across the country for a little over a year now. Now, like the situation in Seth’s blog, these programs always come with strings, for both the business that receive the terminal, and for the agent that the business signs with.

Free terminal programs are not for ownership of the terminal, they are more of a free rental. The business that gets the terminal, does not own it.

Business Owners:
Business owners can expect a hefty early termination fee, and are required to return the terminal in perfect condition if they ever close their account. If the terminal is not returned or is returned damaged, the provider automatically takes the money out of their bank account. The programs almost always come with yearly fees, that are unnecessary almost everywhere else. Also, the merchant account fees that the business pays are always higher than what the business could get in order to cover the cost of the terminal.

Reselling Agents:
Reselling agents stand to lose the most with free terminal programs. At first the idea of giving a free credit card terminal to every customer, sounds great. But, in the even that the business doesn’t return the terminal when they close their account, the cost of that terminal can fall back on the agent. I recently surveyed about 50 reselling agents, and not one of them said that they would be willing to take on the risk of having to pay for an un-returned credit card terminal. How many agents would like a nice $400 deduction from their monthly residuals, because one of their accounts closed and didn’t return their terminal?

The point is that it is rare to find something truly free, and Credit card terminals are far from being an exception.