Equipment Costs and Compensation.  When you sell a merchant, he or she will need a credit card terminal in order to process payments.

What you need to understand is that the credit card terminal or other form of payment technology, such as a phone swiper or online gateway, does carry some costs for the merchant and often an income opportunity for you.  Here are the ways most commonly used to provide credit card terminals to a merchant.

Free Loaner Terminal – Using this model, a free terminal is loaned to the merchant and returned to the processor if and when the merchant stops processing with them.  In this case, there is usually a small monthly fee added to the statement to cover paper and insure the terminal against damage.  This program will have a suggested price and a schedule A cost, so it should increase your monthly residuals. 

Lease – Terminal lease programs have been on the decline in the U.S. market ever since the introduction of the free loaner options.  However, they have made a resurgence this last year with EMV and the need for all merchants to upgrade their terminal.  Leases are generally not favorable because they are often over-priced.  Merchants may be paying several thousand dollars for a terminal worth only a few hundred.  There are more reasonable lease rates, especially when it comes to touch screen point of sale systems and tablets.

Each lease creates a large, up-front income opportunity for the sales person.  As an example, you might sell a lease for $29.95 per month for 36 months on a new VX 520 terminal.  This lease has a total repayment value of $1,078.20 (36 x $29.95.)  The leasing company would use a multiple based on the credit worthiness of the business owner to determine the total payout to you.  In this case, the payout would normally be $600 to $700.  You would then have to pay for the terminal, a cost of perhaps $300, leaving you with a $300 to $400 profit on each terminal lease plus your up-front bonus from the processing company.

In many cases, new sales people to this industry are tricked into selling leases that are $59 or more per month and carry terms of 48 to 60 months.  These leases generate huge profits for the ISO’s that offer them.  The profits are shared with the sales partner.  These merchants eventually realize that the lease cannot be cancelled and that their pricing on the merchant services is not competitive.  The result is a bad experience either way.

Because of the vast profits to be had using this model, these ISO’s unfortunately spend the most when it comes to recruiting and supporting their sales people, giving the entire industry a bad name.  You will often speak with merchants who have experienced this bait and switch.  Your job is to build trust in order to convert this merchant account.

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