It’s the most wonderful time of the year… if you’re not the parent of teenagers, trying to run a business plus support retailers/hospitality during their busiest transactions month! But secretly, I love it; it makes a profound change from last year and quite honestly, I am over the moon; my customers are having such a promising Christmas both in retail and hospitality. It makes the world almost feel normal.
However, once I stop feeling nostalgic and getting caught up in the Christmas cheer and get back to business, in amongst the conversations I’ve had over the past month, one topic is recurring due to fees which are felt most at this time of year, and that is what type of contract is best for a small business using a payment terminal, so I thought it’s a perfect moment to try and explain this.
There are two types of card payment terminal contracts you can utilise as a small business: a pay-as-you-go service where there is no rental fee, but the transaction charges are high, or a rental that comes with a monthly service charge but lower transaction fees. I will attempt to transparently explain both options equally so you can make an informed choice.
Firstly, I recommend assessing the number of card transactions you take as this is the critical factor in determining the most suitable. If you plan on a high volume of card sales, the transaction amounts can add up over the month, even if the transaction values are small. If your goods or services are high in value but low in volume, you will need to calculate the higher fees’ impact against the zero rental.
If you plan to take card payments on an infrequent basis, such as a seasonal market stallholder, you will need to balance out the annual costs of running a contracted terminal versus the higher transaction fee with a PAYG service.
As a rule, once your monthly card turnover goes above £1,500/£2500 (dependant on the average transaction amount), you should start to compare your costs with using a longer-term contract. But let’s take a quick look at the two types individually.
Pay As You Go (PAYG) Card Machine
As a quick summary, the benefits are there’s usually no contract involved, the upfront cost is relatively cheap, the payment equipment is simple to use, you can get good customer support, depending on your provider.
If you purchase a card machine from a payment facilitator like Zettle, SumUp and Square, you will gain the most straightforward pricing model of a PAYG transaction fee per successful card payment.
The fee may be the same fixed rate for any card accepted or different prices for different card types (AMEX, VISA, Etc).
Since there is no contractual commitment, you can accept as few or as many transactions as needed and avoid charges if you stop taking cards – such as someone who only trades at markets.
A few other costs may apply to specific transactions, particularly chargebacks (£0-£30) and refunds (typically, the original transaction fee is retained).
Monthly Card Machine Rental
Another option is to rent a card machine, which means you don’t own it and must return it to your provider at the end of your contract, but you pay a monthly fee and hold it in a contract term. Not only do you receive better rates per transaction with a monthly rental, but you generally also receive better service, capability, and support.
You may pay separately for a SIM card and data for a mobile terminal, but it is increasingly common to have mobile data included in the monthly hire fee.
The fixed, ongoing cost depends on the terminal model, but a stationary, countertop terminal is typically the cheapest. Then we have WiFi/portable terminals in the mid-range, while the 3G/mobile card machines with a SIM card incur the highest monthly cost.
With a rental contract from a payment service provider or acquirer, transaction fees depend on your sales volume, contract length, business type and types of cards accepted. Based on these things, you get a custom quote before signing up, and this is great for stability and will enable financial planning.
Please get in touch with me if you would like to discuss any of this further to determine which option is best for your business, existing or planned. I can negotiate directly with card acquirers to receive the lowest rates available for your business and support you with the entire process. Just contact me at carl@eabsolutions.co.uk
Finally, Merry Christmas & a very Happy New Year, everyone.
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