The Truth About Credit Card Terminal Lease Scams
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The number one problem when it comes to retail merchant accounts is getting stuck with a credit card terminal lease.
What am I getting at?
These days there's no reason to lease a terminal - EVER - because many merchant account providers now offer free terminals when you sign up with them.
And yet, people still get stuck in a lease.
So how does it happen?
Credit Card Terminal Lease Traps to Avoid
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 this one 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 (though I've heard of 60 month lease terms now). 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 merchant services companies are the same. And there’s more to accepting credit cards at your business than most people know.
For example, did you know that a number of merchant processing companies can provide you with free equipment, including credit card terminals?
Or want to know...
How to Get the Best Merchant Account
The number one reason why people get burned is because they are often lied to, or misled during the application process.
And if you think I'm exaggerating just check out some of the comments below this article about what can happen to you out there.
So what can you do to make sure you get the best merchant account?
Get your free merchant account quotes from qualified providers by clicking the link today.
That way you can make a side by side comparison of the different rate quotes, fees, discounts and specials (free equipment, annual fees, etc.).
Get it in writing.
Ask questions.
And then compare their answers and offers for yourself and choose the best merchant account provider that's right for you.
After all, it's your money...
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CommentsLoading...
is there any way to cancel a contract with a provider?
hi jt n. well, the short answer is no. it is a non-cancelable lease agreement.
now, the longer answer is figuring out who you signed up with for your merchant account. that's because the merchant account provider has an agreement with the lease company. so threatening to take your business elsewhere may get them to call the company to cancel the lease.
there's no guarantee they'll do it (i only know 1 instance of this happening), so good luck.
one option might be to have a merchant account review completed (we do them all the time), which may save you money on your processing fees each month. if you can recoup the money on the terminal lease it's better than nothing.
feel free to check out www.ampyourcashflow.com for more details, and thanks for the comment.
hi Micheal, I have a business for a long time, but at this time , I have to closed my business, but the leasing on the terminal is 48 month, how can I cancel them with out paying them.
hi kim,
thanks for the comment. you're in a tough situation, i hope everything works out for you.
the leasing companies will not terminate the lease. and if you close your bank account or try to block payments to them, they may call a collection agency (it has happened).
the best bet would be to call the company that you used to get your merchant account. tell them your situation and ask them to cancel the lease. after all, they are the ones who chose the leasing company (they have a corporate deal with them) and they are getting paid a commission for that lease.
hopefully they will cancel the lease for by making a phone call (this is possible). if they refuse to cancel, then call the better business bureau as well as your state banking authority (credit card terminal leases may violate truth in lending laws -- but i'm not an attorney and obviously can't give legal advice).
does that help to answer your question?
Hi! How can you cancel a merchant service contract when no lease is involved? If you own your own terminal but are unhappy with the service-mostly because of a language barrier (they are unable to assist w/ questions we have) We also have never recieved a completed final contract or the terms and agreements that we were promised 6 months ago. Is there anything we can do?
Hi Pam,
sorry to hear about your situation. Do you have any paperwork from when you signed up? If not, look over your most recent merchant statement and call the customer service number to ask about cancellation.
There may be a termination fee. Without knowing the company it's tough to give you more directions than that. Most likely there will be a termination fee... but I have no way of knowing what that will cost you.
Please let me know if calling customer service helps out or not.
Hope that helps. You can also check out http://ampyourcashflow.com if you'd like to reach me directly.
Hello,
As a business owner, I signed a lease with a company. The problem is that the terminal didn't work at all. And the agent who said he would be at my disposal was very unprofessional and didn't answer my calls when I called him to help me fix it. Also, he wasn't knowledgeable about the terminal at all. I chose to go back to the company I was originally with. Now the representative decides to show up and say I am still legally bound (even though when I originally asked him if I would be legally bound to the contract even if the terminal doesn't work, he said NO)
What do you think?
Thank you?
hi brian, thanks for the comment. unfortunately he's right. once you sign a credit card terminal lease they run for 48 months and can't be canceled. the reason? b/c the contract or agreement states that it can't be canceled, despite what the sales rep told you. now, depending on how you found this company (i.e. through your local bank) you can complain and try to get this reversed or waived, but from experience this doesn't happen too often.
the only recourse is to find a new provider and hopefully the savings in monthly processing fees will offset the terminal lease.
I am a small business owner who fell into the 48 month, non-cancellable lease trap. This lease is killing me and I want out. My question is, if I simply close my business acount and return the equipment, what are the chances of them actually taking me to court. And, if they do, can the court seize any of my personal or business property?
hi chris, and thanks for the comment. i'm not an attorney so i can't offer any legal advice - this is just my personal opinion. i would imaging the factors would be: how long into your lease are you, and how much is still owed on the lease. if you set up your business as llc or some sort of corporation you should have some protections. chances are they would send you to a collection agency affecting your credit rating.
if you are still in business, why not find another merchant account provider. perhaps they can do a rate analysis and save you money on your processing fees each month -- enough to make up what you're spending on the lease?
just a suggestion. you can get merchant account quotes here: http://bestmerchantaccountquotes.com/get-the-best-
you might also speak to your attorney regarding your thoughts as well. good luck to you regarding the lease, and thanks again for sharing your comment.
I own a small business and was looking to save a few dollars so I switched providers. I told the rep that I din't want to lease the terminal and he said that would be fine. After recieving the contract a few weeks later I was shocked to see he signed me up for a 60 month lease! He out right lied to me. The company MSI Canada, won't budge saying I should have read the contract. Wow, always read these things. Lesson learned.
hi dean, and thanks for leaving a comment. sorry to hear that you got caught in this trap as well. was it a checkbox on your application that got you? providers that use these types of applications should insist that the business owner (in this case you) have to initial the box or something to verify that you want the lease.
why not review your application to see how you got caught in their lease trap? and yes, i've been telling business owners for years that they have to review the contract very carefully before they sign up. there are good providers out there, though it can be challenging to find them.
I'm a small business and 2 years ago I fell in 48 months non-cancellable lease which original was for $109 per month and now i'm paying $121. I call & sent e-mails to the company (ABC processing located in Sta Clarita CA, who sign me up for this and no luck they are so unprofessional, they totally ignore me. I try to make a deal with the lease finance company and they told me that only the company that sign me up can cancell it.
I can't wait for this nightmare to be over, I learn my lesson.
Hi CB, thanks for the comment. I know someone who might be able to help. She can't get you out of the lease, but she might be able to save you enough money on your processing fees to ease the pain. let me know and I'll pass her number along to you.
Another thing is that the lease company is not being honest with you. They can cancel it if they wanted to, but with your name on the contract they will not do it.
Another angle you might want to try regarding the lease is to call your State banking office and see if the lease company is in violation of the "truth in lending" law. In fact, b/f calling your state banking office it's worth a shot to tell them that you are thinking of filing a class action suit regarding this possible violation. perhaps that might scare them enough into canceling the lease b/f the term expires?
Thanks for the strategies you are discussing on this web site. Another thing I'd prefer to say is the fact that getting hold of duplicates of your credit file in order to look at accuracy of each and every detail is the first step you have to execute in repairing credit. You are looking to clean up your credit report from harmful details faults that wreck your credit score.
Hi Alberto, glad you liked the article. You raise a great point about checking duplicates and repairing credit. Thanks for sharing.
The non-cancelable lease aggreement expired over a year ago, and we have returned the credit card machine, with the UPS delivery reciept as proof (The address they gave us, both verbally and written). We would like to make the final payment, however, they are continuing to add monthly charges to the bill for the machine THAT THEY HAVE IN THEIR POSSESSION! They are now calling my parents and my wife, harassing and threating them with ruining their credit, even though my name is the only name on the lease as personal guarantor. What do I need to require from them, in order to prevent them from hitting my credit score, once I've jumped through the remaining hoops?
Hello Steve,
sorry you ran into this trouble. I would do a few things. First, find another processing company. Second, I would contact the BBB in your state and theirs (if different) and file a complaint. Third, I would contact your State's banking office or commission and file a complaint. Lastly, change your bank account.
Finally, those are empty threats. It sounds like they took you to a collection agency (and not a reputable one). They cannot ruin anyone's credit (who is not on the paperwork), and they are violation of collection laws (based on what you are telling me). So next phone call tell them to cease and desist or you will contact an attorney and file a lawsuit against them for violation of collection laws.
What company was your lease through? Do you have evidence that the lease was canceled? I ran into a similar trouble with Pitney Bowes and their stupid postage machine (which is why I now use Stamps.com). And they took me to collections AFTER getting their machine back and NOT refunding my postage. It finally got settled after 6 months.
I hope this helps you out...
Lease Finance Group, LLC is the name of the equipment leasing company. They have an F rating with the BBB. Of course, I didn't need to know that until after I finished using them as a vendor. It is them themselves doing the collecting, and I discover that they reported me to 2 of the 3 credit agencies in January. They falsified information when doing that, so we have to refute that now as well. Even though they have done that, they are still calling and harssing my parents. I wrote out a C&D for my father to sign and mail to them.
I have a copy of the lease with my signature dated
2/07, for a term of 48 months. They reported it to the credit agencies as 2/08. So, at least I have the written proof, and that should eliminate any issue, but until it's resolved, that's the only negative on my credit report.
Hi Steve,
thanks for sharing with the readers of this article. These days it makes no sense to lease a terminal, especially with so many providers offering free equipment programs. Of course, some agents write the lease into the contract without some people knowing about it. A real mess if you ask me. Good luck in your battle with the leasing company. And you may want to consider switching to another merchant account provider (if you haven't done so already).
Thanks all for the postings and insight! I also got caught in a 48 month lease and cannot get out of the contract, even though I had to close the business. It is so frustrating, but I appreciate everyone sharing experiences and options.
Hi Dana,
glad you liked the article. Too bad you didn't find it before you got stuck with the lease.
Thank you for the advice. Wish I had known about everything. Now our contract is over May 28, 2012 and I called in December and again to follow up in March to make sure it was cancelled this May. Well, on our contract it says nothing about having to cancel 90 days ahead of time otherwise you still get charged the fee of $395 or get signed up again. Its funny, since faxed a letter trying to get up to change some fees and sign up again in January. In the letter, they acknowledge our first contact. Now they are trying to drag our cancellation to June 20th saying that will be 90 days. Now I feel like they are not only stabbing us but turning the knife. Any suggestions?
Hi Jackie, stay on top of them. I suggest switching to another merchant account provider (for starters) because the terminal lease people you are signed up with came through your old merchant account app. Different companies, to be sure, but the lease company is the "chosen" provider of your merchant account people. Plus, many merchant account providers offer free equipment (often considered a $0 rental) when you sign up with them. Add in that you can get a review of your rates and you might even save money. If your lease company continues to mess around you might want to call your state's department of banking and cite your situation as a violation of the "Fair Credit Reporting Act." And let your lease company know that you are doing so. Good luck and keep me posted...
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Mark 3 years ago
What this guy says is totally true. I got hugely ripped off with my first credit card merchant account. the credit card swiping machine cost me 49 bucks for 4 years. and I couldn't cancel it.
Mark Shepard
http://ModernJedi.com