T-Mobile has a great commercial, with the punchline “that’s your standard fee…fee” pointing out the hidden costs associated with changing cell phone plans. Choosing a point of sale from the wrong company can feel like buying a new phone. The advertised price looks great, then when you checkout and get your first bill, suddenly the price has increased dramatically. There is a frustrating amount of fees and you’re now stuck in a contract that is expensive and hard to break.
Customer Deception
If a deal is too good to be true, it usually is. Many point of sale providers advertise and quote prices that seem great at first until you read some of the fine print or hit with unspoken, after-the-fact fees. One of the big tricks they have up their sleeve is credit card processing.
Many point of sale companies require customers to use their credit card processor as a way to make money. They sign exclusive contracts with these companies or are even owned by them. When you’re shopping around for a new point of sale system, the quote you see is not always the real cost after switching over to their credit card processor.
How Point of Sale Intersects with Credit Card Processing
Point of sale systems facilitate transactions, but in order to accept more than just cash, you need to work with a credit card processor. The credit card companies (Visa, MasterCard, American Express, etc.) have an interchange rate or a per transaction charge, for processing their payments. As a business, you can not accept the payments yourself and pay the fee. Credit card processors act as the middleman, and make their money by charging their own fee on top of the fee from the credit card companies.
There are less and less cash-only businesses as card-based payments have become the new standard. Some states even allow businesses to be credit/debit only and not accept cash to speed up the transactions. It is typically in the best interest of most businesses to accept credit cards and pay for a credit card processor.
Losing Your Power
Not all credit card processors are created equal, their fees and rates differ dramatically. If you’re forced into choosing a credit card processor because of your point of sale system, you lose the ability to shop around and find the best rates. The credit card companies that work with these contracted point of sale systems know this and can charge more as a result.
Many of these companies offer point of sale and payment processing all in one, just charging a percentage of each transaction and/or a monthly fee. The more you make, the more they make. Some companies charge almost 4 percent of EACH transaction! If your business is making $25,000 in profits, the point of sale company takes $938 (for a 3.75 percent fee) and you still had to purchase/lease the POS software (which is usually an overpriced tablet without the necessary peripherals).
Your Fee…Fee
There are many different pricing strategies, combining flat monthly fees, per transaction fees, or percentage fees based on sales. If you’re working on a tight bottom line, these extra fees and increase prices can affect your business. Until you hit a certain benchmark, you may not even be aware of the extra fees. The “lower” cost of the point of sale system becomes expensive. Some of these hidden fees are cancellation fees (from your old credit card processor), activation fees, service fees, transaction fees and statement fees. Some processors are also faster than others at delivering your funds, which affects your cash flow.
Contracts
Unless you have a background in law, these contracts are very hard to understand. Many credit card processors create complex pricing models and make it very difficult to find out how much you’ll actually be paying. The initial quote may look great on paper, but you’ll notice a difference in your sales versus your funds
These credit card processors also have strict cancellation fees are incentivized to automatically renew contracts without notice. You receive no phone call, email, or other notification of the upcoming renewal date. If you swipe a credit card on or after this date, you’ve just renewed your contract and will suffer penalties for breaking. You become stuck in a cycle with a credit card processor that is hurting your bottom line but is too expensive to cancel AND it’s tied with your point of sale system, which you need to do business.
The Zonal Difference
Zonal works with any credit card processor. We don’t care who you use, if you’re happy, we’re happy. If you like your credit card processor, why should you have to pay to break a contract and start a new one? We don’t aim to make money by signing a contract with a processor and forcing customers to switch over. You should be able to choose your own processor so you can negotiate the lowest rates possible and maximize your profits. We want you to succeed and expand (hopefully enough to open more locations) and staying a part of the Zonal family, that’s how we make our money. We value honesty and transparency; we are partners, not just a provider.