Which card reader, and what it actually costs

A reader costs tens of pounds. The deal around it costs hundreds.

A card reader for a small UK shop starts at £19 to £29 plus VAT if you buy it outright, and the three companies that sell the cheap ones charge between 0.99% and 1.75% per transaction. The money is not in the hardware. It is in what the contract does after the first year: the term you signed, the monthly minimum, and what it costs to leave.

Three ways to get a card machine, and what each one does to you

1. Buy it outright. You pay once, the device is yours, and the only ongoing cost is the percentage per sale. If the provider disappoints you, the loss is the hardware, and on the entry-level readers that is under £50.
2. Rent it monthly from your acquirer. The rental sits on the same statement as the fees, which is why it is so easy to stop reading it. Rental is a charge like any other: it belongs in your effective rate, and most people never put it there.
3. Lease it. Often a separate contract, sometimes with a company other than the one whose logo is on the machine. Read the party names at the top of the page before you sign anything with the word lease on it, because that name decides whether the limits below protect you.

After its market review the Payment Systems Regulator capped POS terminal lease and rental contracts: an initial minimum term of no more than 18 months, then rolling terms of no more than 31 days. Any exit fee has to be cost based and explained before you sign. The rule binds the 14 largest card-acquiring providers for merchants with up to £10m of card turnover, and those providers must make sure a separate lease or rental company supplying their merchants complies too. The one gap: a terminal you got from a third party with no link at all to your card provider.

Where a monthly plan starts paying for itself

SumUp’s own page says Payments Plus is the better deal above £3,300 of monthly sales. Work it out yourself and the plain number is lower: the plan saves 1.69% minus 0.99%, which is 0.7% of turnover, and £19 divided by 0.007 is £2,714. The gap is VAT. Add 20% to the £19 and the plan costs £22.80, and £22.80 divided by 0.007 is £3,257, which rounds to the figure on their page.

So both numbers are honest, and they answer different questions. If you can reclaim the VAT, your break-even is around £2,700 a month. If you cannot, it is around £3,300. And either way the saving only applies to the cards the discount covers, so a shop that takes a lot of business or foreign cards crosses that line later than the arithmetic suggests.

Four questions about the machine

Is a free terminal ever actually free?

It is free of an upfront price. It is paid for through the rate, a monthly minimum, a rental line, or a term you cannot leave. Add those to your effective rate and you can see what the machine cost.

Can I take my reader to another provider?

Usually not. Entry-level readers are locked to the provider that sold them, which is why the cheap price is not a sunk cost worth defending in a bad deal.

Does the 18-month rule cover my terminal lease?

Yes, in most cases. The regulator capped POS terminal lease and rental contracts at an 18-month initial term for merchants with up to £10m of card turnover at the 14 largest providers, including leases arranged through companies that supply those providers’ merchants. It does not reach a terminal bought from a third party unconnected to your card provider.

What should I ask before signing?

Four things in writing: the term, what happens on the day it ends, the monthly minimum, and the cost of leaving early. If any answer arrives as a phone call rather than a line of text, ask again.