Yes this is a REAL story.
I’m gonna tell you a story about a business owner in Northern Indiana who overpaid for equipment by 77%!
No, that’s not an exaggerated number, it’s real.
What she overpaid for happens to business owners all the time and quite frankly I’m not sure how or why it happens so frequently.
So, the whole reason for this article is to bring awareness to a business practice that I hope dies like the dinosaurs because it’s borderline highway robbery.
Here’s the story
For the purpose of the story and protecting identities, I’m going to refer to the business owner as: Cindy.
Cindy was minding her own business and running her local restaurant in Northern Indiana when a “helpful” merchant services representative entered her business. Let’s call him Sly.
Sly: “I have an unbelievable deal for you on your merchant account.”
Cindy: “Well, thank you but I already have service that I’m happy with.”
Sly: “Okay but you should really take a look at this because I have wholesale rates and I’m saving my customers a TON of money.”
Cindy: “Oh really? Okay, I’ll listen to what you have.”
And it’s all downhill from there.
Sly proceeds to tell her that because of the processing company that he works for, which he explains to be the “biggest and best” company in the whole industry, he can get “at cost” rates which will result in hundreds of dollars saved off of processing fees each and every month for Cindy’s company.
As he explained it to her, she would save nearly .50% off of her total volume each month. The cost savings analysis that he put together on the spot for her showed the following simple calculation:
$100,000 monthly processing volume X 0.50% savings = $500 savings each month
Seems like a great plan and there was only one requirement to Sly’s proposal.
Sly: “You have to use our equipment in order to use our service.”
The cost of using Sly’s equipment?
$254 per month!
But Cindy is saving $500 off processing fees so she’s a net $244 savings!
“That’s awesome” she recalls and signs the contract for the savings!
Sly disappears and she NEVER hears from him again.
The aftermath – picking up the pieces
This is the perfect example of a SHARK taking advantage of what you don’t know.
Sly locked Cindy in to a non-cancellable terminal lease for $254 per month for a 60 month term!
$254 x 60 months = $15,240 paid over the course of 5 years.
On a side note, the machine that Cindy received has a retail cost of about $250 to purchase making the $15,240 that she is required to pay for the terminal 77% more than she needs to pay.
But that’s not all…
If you haven’t guessed already, there is NO SAVINGS with the merchant account that Cindy was given. All that talk about “wholesale rates” was just a line to get her to sign up for the terminal lease, for which Sly earned a huge commission check.
The entire sales presentation was a big, misleading promise.
Cindy believed she was getting one thing, but instead simply signed a contract for a huge monthly terminal lease payment and the savings was non-existent.
Now, before you chalk this up to the possibility think that Cindy is just gullible remember that this happens ALL THE TIME.
Think about it, it’s not hard for a terminal sales person to make a sale when they flat out LIE to you, and that was the case with Cindy.
For the record, here’s the three lies told by Sly
- “you must use our equipment” – Credit card terminals are RARELY proprietary. Most of the time they can be used with any merchant services provider.
- The rates for the merchant services agreement were NOT lower than what she already had.
- He never told Cindy about the contract that she was signing for the terminal lease. He mislead her to believe that it was a month to month contract.
All of those variables along with the fact that Cindy didn’t know any better contributed to this catastrophic mistake.
How to avoid this scenario
The scenario and deal that Sly offered to Cindy is too good to be true.
If you EVER get offered something like this by a provider that you have never dealt with, politely tell them to take a hike.
So how can you avoid this from happening to you?
Here’s three things that you can do to ensure that you always get a fair deal and that you never overpay or get caught in a predicament like this.
- Always compare it to another providers proposal. This will at very least give you a benchmark to compare whether the deal in question is out of left field or if it’s in line with what other providers are offering.
- Never, ever, ever, sign a long term contract for credit card processing equipment. Make very sure that you know what you’re signing and DON’T take the salespersons word that it’s just a month to month contract. Get it in writing.
- Find a provider that is going to take care of you and act as your advisor for all things related to payment processing. Then, things like this never happen.
The final thing you can do to protect yourself is to check this very blog frequently. We’re always adding new updates and awareness tips that help you maintain a merchant account that is fairly priced.