If you have read our article below then you would know that there is no such thing as a free POS system? Typically “free” point of sale systems end up costing a lot more, not just because of lack of quality, but in actual money paid for the POS. If you have not read these articles, we strongly suggest you read them before proceeding:
- Can I get a Free Point of Sale POS systems with Merchant Account or Credit Card Processing?
- What is the difference between Sintel Systems and a free point of sale POS system?
So what are merchant account loans? Merchant accounts are the way in which merchants accept credit cards. So a company goes through a service provider and gets and gets an account to be able to take credit cards. Couple of pieces of useful advise before going on:
- In case you are looking for a merchant account, do not only consider merchant account fees as the sole determinant of who to go with. Instead consider on the processing time and customer service. Saving a few dollar is not worth slower speeds. It just does not make sense and you can read more on the importance of credit card processing times here:
- Get your merchant account from your POS provider. Integrated systems just get you much better overall service. If you have a merchant account and want to get a POS, then read: “What do I do if I have an merchant account, but want an integrated point of sale systems?”
As we all know the company will pay a certain amount (usually per transaction and/or percentage) to the merchant account. So lets assume you charge $100 daily on your merchant account and end up paying 2.5 percent or $2.5 per in fees for the $100. That is pretty straight forward. A merchant account loan is when the credit card processor gives you a loan and then they take a certain amount of revenues each month until your account is paid in full. So say that you take a loan for $10,000 from them, then charge $100 per day on credit cards so you generate $3,000 in CC charges each month. So as an example, you agree to pay them 20% of your revenues each month towards the loan. So in this case, you pay them $600 a month until your loan is paid.
How is it that some claim it as free? They basically loan you the money to buy the POS at a higher price and then charge an interest on top of it.
So is this a good idea? It depends on:
- The interest rate they are charging on the money you are borrowing and how much you anticipate to generate in CC sales. The higher the interest and the lower your projected credit card sales, the worse off you are.
- If you are considering to basically go for the “free system” be careful on how much you really end up paying for the POS. In these cases, POS systems are priced much higher than they should be.
Since these rates are typically higher, we usually recommend customers look into all potential sources and then compare each of them.
So once again, the answer is that there is not such thing as a free POS system.
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