Should You Lease a Credit Card Terminal?

The short, definitive answer to this question is NO.

You should never lease your credit card machines because doing so will cost you a lot more money in the long run. If a provider or agent is encouraging you to lease your terminals, they’re not looking out for your best interests.

In fact, some companies that are pushing businesses to lease their equipment are downright scammers, as you’ll discover in the following news clip:

Why leasing your credit card machines is a bad idea

Simply put, leasing a credit card machine costs way more money. Terminal leases can cost around $30 to $100 per month over 2 to 4 years, which can add up to thousands of dollars over the course of the agreement. Meanwhile, you can purchase a credit card machine upfront for a few hundred dollars (maybe $400 and up if your machine is on the high end.)

Think of it this way: Would you pay $4800 for a $300 terminal? One merchant that we spoke to did exactly that. She had a $99/mo lease for 48 months on a terminal that could have been purchased for under $300.

Make no mistake: leasing your credit card machine is a terrible idea and you should run from anyone trying to convince you otherwise.

Misleading claims and myths around credit card equipment leasing

Speaking of which, what exactly do leasing companies tell merchants when convincing them to lease the equipment? Here are some of the claims and myths to watch out for:

No upfront fees – This is an incredibly weak and misleading argument.  As we’ve already established, leasing your terminals is a more expensive route (literally thousands of dollars more) compared to buying them upfront. So while it’s true that you have no upfront costs from leasing, you’re still paying unnecessarily higher fees in the long run.

The costs are tax deductible – Yes, you can certainly deduct your leasing fees for tax purposes, but you can do the same thing for the costs of buying your equipment.

Your equipment is insured – While your leasing company may insure your credit card terminals, equipment insurance may not be as big of an issue as you might think. Credit card machines these days are quite durable and can work perfectly for years, without hiccups.

That said, if you do run into damages and malfunctions, your merchant account provider may be able to cover these expenses, if you bought the equipment directly from them. If this isn’t an option, then you’ll find that the cost of fixing or replacing your credit card terminals are still lower compared to the long-term costs of leasing them.

Your credit card equipment may be obsolete in a few years – A leasing company may argue that since technology is moving at such a fast pace, it isn’t a good idea to buy a machine that would be obsolete in a few years.

This simply isn’t the case. Credit card terminals can keep up with technology and last for several years.

Besides, even if you had to replace your terminal every 2 to 4 years, you still end up saving money compared to leasing.

What to do instead

Now that we’ve covered they myths and misconceptions around credit card machine leases, let’s discuss your alternatives. Here are some of the things you can do instead of leasing your credit card terminals.

Reprogram your existing equipment – If you’re switching to a new payments processor and already have existing credit card terminals, you may be able to rework them for your new provider. At Payment Depot, for example, we can help you reprogram your credit card equipment for free.

Purchase new credit card machines – Spending $300 on a terminal can be a tough call, particularly if you’re just starting out. But remember that buying is a far cheaper option for the long-term. The immediate savings are not worth the higher fees over the lifetime of your account.

Rent the equipment – This isn’t ideal, but if you truly cannot cover the cost of buying new credit card machines, then you can rent them instead. Just make sure that your agreement doesn’t come with any long-term commitments and that it can be canceled at any time with zero penalties.

Bear in mind that you may need to cover insurance costs for your rental, so factor in those fees as well.

Note that renting should be a temporary fix, and you should opt to buy your equipment once you have the cash flow or resources to do so.

What about “free” equipment?

We know that some payment processing companies offer “free” equipment, and while this option looks attractive, you need to tread carefully.

Companies that offer free equipment typically make up for that cost many times over through processing fees. In other words, you eliminate upfront costs, but end up paying more over time.

If you’re tempted to sign up with a credit card processor because of the free equipment, take a close look at your agreement and calculate your processing rates. There’s a good chance that you’ll shell out higher-than-necessary costs for credit card processing.

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