Forums: Discussions for entrepreneurs and small business.

By simply typing "merchant account" into a google search page, many advertisements for FREE credit card terminals flood your results screen.  Are these terminals really free?  The answer is yes and no.  These "free" terminals are typically provided on a loan basis.  You keep the terminal for as long as you process with the company who loaned it to you.  Free terminal programs are not necessarily bad, they are typically best for start up companies and new businesses who do not have the cash flow to purchase a terminal up front.  Free terminal programs are certainly better than lease programs that tie up a business into a non cancellable lease.

So what`s the catch?  Typically, the fee structures of free terminal programs are higher than if you purchase the equipment outright or if you reprogram existing equipment.  Below is a side by side comparison of the differences between a typical FREE terminal program vs. a program where you either purchase or already own equipment.

Typical FREE Terminal Rates/Fees:
Qualified Rate:    1.69% - $1.79%
Mid Qual Rate:   3% - 5%
Non Qual Rate:   3% - 5%
Transaction Fee:  $0.25 - $0.30/transaction
Batch Header:     $0.35/batch
Monthly Basic Service Fee:  $10/month
Monthly Minimum:  $25
Annual Fee:         &n bsp;$79/year (Typically covers next day replacement of terminal)
Contract Term:    36 Months

Equipment Purchase/Reprogram Rates/Fees:
Qualified Rate:    1.59% - 1.69%
Mid Qual Rate:   2.2% - 3%
Non Qual Rate:   3% - 3.5%
Transaction Fee:  $0.20 - $0.25/transaction
Batch Header:     $0.00 - $0.25/batch
Monthly Basic Service Fee:   $5 - $10/month
Monthly Minimum:   $0 - $25/month
Annual Fee:         &n bsp;  $0 - $15/year
Contract Term:       Variable

After doing research on both types of programs, you can see that Free terminal programs typically cost more on a per transaction and monthly basis than if you were to purchase the equipment outright.  Free terminal programs are not necessarily a bad program, it just depends on what type of cash flow the business has at the time the account is opened.  Just be sure to know all fees associated with the account before you sign for a "free" terminal with a credit card processing company.

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Oliver Mupas
United Bank Card
866-207-6007 ext 303
omupas@ubcnetworkonline.com

Could you describe the difference for qualified, mid qual and non qual.  I assumed all transactions had a 3% fee.  That is what I here all the time.  Visa takes 3%.  It seems it is more complicated then that.

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

The rates and structure of your merchant account depend on your business type.  Different rate structures apply if you are a retail storefront vs. a mail order/telephone order or internet based business.

Typically, the Qualified, Mid and Non Qualified are defined as below:

Qualified Rate:
Typically includes swiped check/debit and consumer credit cards

Mid Qualified Rate:
Typically is a keyed transaction with an address verification match

Non Qualified Rate:
Typically includes keyed transactions without an address verification match, business/corporate cards and international cards.

A big buzz in the industry today is on Rewards Cards.  Depending on the company you do business with for your credit card processing these cards either fall in the Mid Qualified or the Non Qualified Rate category.

If you need any specific information pertaining to your particular business type, please feel free to ask, I`ll be glad to help you understand this as much as I can.

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Oliver Mupas
United Bank Card
866-207-6007 ext 303
omupas@ubcnetworkonline.com

Thanks.  I learned something today. 

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

No problem, if you ever have any questions about merchant accounts/credit card processing, I`d be happy to answer any questions, in fact, I`ll start a new thread on that subject to help anyone on the forum who might be interested.

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Oliver Mupas
United Bank Card
866-207-6007 ext 303
omupas@ubcnetworkonline.com