# How much does a card machine cost in 2023?

Are you trying to calculate the cost of a card machine for your small business?

Retail purchases in the UK are becoming increasingly powered by the use of:

• debit cards (up by 12.4% year on year),
• credit cards (up by 11.3% year on year), and;
• contactless payments (up by 14.4% year on year)

(Source: UK Finance ‘Card Spending Update’)

So, whilst it’s definitely in line with demand to get a card machine for your business, it must be said that the card payment machine marketplace is very fragmented and quite complicated.

With that, the various layers of fees, percentages and charges makes pinning down accurate costing a tough challenge.

In this article, we hope to give you a helping hand to identify the basic costs of using a card machine and to decide between types of card machine – along with a calculation example to answer: “How much does a card machine cost?”

## Card machine costs: The Basics

### Contract, or PAYG (pay-as-you-go)

This is the primary determinant of cost when considering using a card machine for your business.

As with any contractual service, the true cost relates to the entire length of contract.

Tip: In other words, don’t think of a £30+VAT monthly fee card machine as a monthly cost.

But rather, if it were a 3 year (36 month) contract, for example – think of the cost as £1,296.00

If you were then comparing this 3 year contract cost with, say a 1 year contract machine, simply multiply the annual cost of the 1 year card machine by 3 to directly compare it to the 3 year contracted machine.

This way you are comparing like for like.

Example:

Dojo card machine offers a 6 month contract with the obligation to pay £20 per month rental charge.

Beyond the 6 month period, the contract then changes into a monthly rolling contract.

The Dojo contract therefore costs £120.00 – but after 6 months, it’s £20 at a time.

### Cost elements

Card machine costs generally fall into two categories: one-off cost and recurring cost.

#### One-off costs

Example one-off costs might be:

• purchase price of mobile card machine
• set-up fee for rental card machine

As the name of this particular topic would indicate, these costs occur at a single point in time and never again. Whilst by nature, you’ll mostly just consider them at the time of incurring cost i.e. when you acquire the machine terminal, their impact on overall cost beyond the short term will diminish with every transaction performed.

#### Recurring costs

The main recurring costs will be:

• transactional costs (flat fee or percentage)
• monthly hire fee for certain rental card machines

These costs apply only as triggered by a qualifying event.

So for example, in the case of recurring transactional fees, the cost incurred only happens when a ‘transaction’ occurs.

In other words, for each transaction, there must apply transactional costs.

For example, for a transaction worth £100.00 – at 2.9% transactional cost would amount to a £2.90 fee.

### Transaction volume and value

Beside contractual lock-in, the next most important factor to consider when assessing the actual cost of using card machines is the volume of transactions throughout a given period.

Why?

In every example of card machine use, there are transactional costs. Therefore, the number of transactions you run through the machine (during a given period) directly impacts the cost.

As you’ll see later, depending on the combination of cost elements applied there are occasions that in a short term case of use a particular card machine would work out cheaper against another.

Whereas had the intent been for long term use, that same machine would be more expensive.

The key question to answer is:

“How many transactions do I intend to process per month? And what is the total value of transactions?”

Tip: For any serious small business (i.e. turning over at least £2,000 within a minimum trading period of a month), transactional cost will always be the majority cost element in running a card payment machine.

### Fixed or variable transactional fees

Oftentimes, card machines have a 2-part transactional cost:

• percentage of the transaction amount (variable)
• transaction flat fee (fixed)

In such cases, both fees must be included within transactional cost.

For example, the Dojo card machine charges the following costs per transaction:

1.4% + 5p flat fee.

So, in the case of a transaction worth £150.00 the transaction fee would be:

£2.15

### Equations

Given that we have now examined the fundamental cost elements which contribute to the basics of card machine pricing, lets package up these rules into a couple of universal equations for calculating the cost of:

1. an owned card machine
2. a rented card machine

#### A simplified equation for working out the true cost of an OWNED card machine

C = P + ((n*x) + (n*y)) + e

Where:

• C = Cost of owned card machine (for certain number of transactions over certain duration of use)
• U = Card machine purchase price
• n = number of transactions within the duration of use
• x = fee percentage
• y = flat fee per transaction
• e = extras e.g. refund charges, chargebacks, VAT etc.

#### A simplified equation for working out the true cost of a RENTAL card machine

C = S + (m*d) + ((n*x) + (n*y)) + e

Where:

• C = Cost of rental card machine (for certain number of transactions over certain duration of use)
• S = Card machine set-up fee
• m = monthly rental fee
• d = contract duration in months
• n = number of transactions within duration of use
• x = fee percentage
• y = flat fee per transaction
• e = extras e.g. refund charges, chargebacks, VAT etc.

These equations are provided purely for the purpose of giving you some practical guidance on how you might approach calculating your own card machine costs from the provider details.

Once you have your costs, naturally decision making will follow.

## Card machine costs: Making Your Decision

So far, we’ve understood the basic cost elements of either renting or buying a card machine.

Now to take a look at some real market offers and weigh up the cost vs. benefit to guide you in making the right buying decision.

### Buy vs. rental: card machine

There are two ways to acquire a card machine: buy or rent.

Each card machine option has its own cost/benefit profile that lends itself more economical a particular scenario, more than an other.

Here’s how buying vs. renting a card machine trade off against each other:

It is possible that your business can own it’s card machine outright. No contract.

Pros: The advantage is that once owned you are not obliged to pay any recurring fees. No obligations, no contractual lock-in.

Cons: However, the drawback is that are that you might pay a shade more per transaction compared with the rental machines.

(We’ll take a closer look at this kind of cost comparison further on in this article.)

But first, here’s what those owned or ‘bought outright’ card machines look like:

##### App-based

Typically, card machines available for purchase are app-based i.e. they are tethered to your smart phone.

Think of them as a lite version of the traditional terminals which, by contrast, run as standalone – off their own SIM card.

Price: under £50

##### Wireless

If preferred, most app-based card machine providers also offer a 4G or 3G SIM wireless version that does not require the involvement of any smart phone application.

Price: under £100

##### Counter top with built-in printer

For the convenience of a more ‘retailer ready’ solution, you can pay a little more for a machine that has a printer and stand.

Price: above £100

Don’t like the look of the app-based terminals, but still want to own rather than buy? It is generally quite difficult by comparison to buy a traditional looking counter-top card machine. They are almost as a rule only acquired as rental machines. However, there are some dealers who field enquiries for purchase requests and have their means of fulfilling.

Price: £200+

#### Renting a card machine

Renting a card machine means being legally obliged to fulfil your recurring payments until the close of contract.

Pros: sturdier counter top machine; built-in printer; often at a slightly lower transactional fee compared with the purchase machines which is geared to reward high-volume retailers with savings in the long run (incentivised to be locked-in).

Cons: contractual lock-in which for low-volume retailers will cost more and perhaps exceed their need; complicated transactional fee structure (hidden costs).

Here are some prominent rental options:

##### Joining fee or set-up

With some card machine rental companies there is a a join up fee (which would presumably cover P&P delivery cost of the machine). Others waive the sign up fee as a sweetener to get you on their books.

Price: under £40

##### Fixed monthly rental fee (aka. membership fee)

All rental providers of card machines tie you in to a monthly payment arrangement for a specific term. Companies like WorldPay lock you in to an 18 month contract, others longer or some shorter.

Price: under £30

##### PCI compliance fee

Charged as a levy to fund the Payment Card Industry Data Security Standard (PCIDSS).

This is a set of security measures that are developed by the PCIDSS (PCI Security Standards Council). A regulatory body acting on behalf of card scheme vendors to offer consumer peace of mind against fraud and ID/financial theft.

Price: either fixed fee per transaction, like 5p, for example – or monthly fixed fee, like £4.95 per month

### Transaction fees

For every transaction processed by your card machine you will be charged a transaction fee.

However, in some rare cases like with QR code transactions via SumUp, a provider might waive the fee entirely making that method of transaction free.

Each card machine provider will levy their own charges. Plus, the charge structure with some providers will be tiered, charging a different fee depending on the value of sales you made within a month.

And being as there is no industry standard on fees, you’ll have to do your homework to discover the deal and provider which offers the most cost effective solution for your business.

Firstly, understand that there is generally a rule of thumb regarding fees charged by providers selling machines vs. those renting card machines.

Card machine rental is the traditional route. Providers historically used the contractual lock-in feature to guarantee themselves a minimum return on investment (ROI) for every individual customer account.

However, as marketplace competition has increased, we’ve seen an emergence of ‘Buy Now’ card machines.

These machines have no contractual lock-in and to offset against short term use, however, providers of purchased card machines raise their transaction fees a few points above their rental counterparts to compensate for not imposing a minimum term of use.

Take SumUp (pay-as-you-go card machine) transaction fees vs. Dojo (rental card machine), for example, which are:

1.69% vs. 1.4% respectively.

(That a difference of 0.29% per transaction – Dojo offering the cost advantage over SumUp, on the basis of fees alone.)

But tread carefully and do your research, because the expected difference in fees isn’t always that significant a gap. And therefore, when you add up monthly rental charges or membership etc. these additional cost items can tip the cost/benefit balance the other way – cancelling out the lower transactional fee advantage.

That being said, if you do enough volume of sales per month, a transaction fee saving of 0.29% against, say, £200,000 monthly sales is still a saving of £290.00 per month (which is over 10x the Dojo card machine rental charge) – or, £3,480.00 per annum (which is a meaningful sum of money). Dojo in such a case would be more economical.

#### Card machine transaction-based fees

##### Percentage

The main transaction cost is packaged as a percentage charged on every transaction. This is simply known as the ‘transaction fee’.

Take the SumUp card machine transaction fee, for example, of 1.69%. For SumUp users, this means every card transaction processed is carries a charge of 1.69%.

For example, a transaction of £20.00 will have a transaction fee of £3.38 deducted.

##### Fixed

Often, there is also a fixed fee applied by card machine providers to each transaction taken. The reason in most cases is to cover the PCI compliance fee.

Take the MyPOS card machine, for example, which charges: 1.10% + £0.07 per transaction.

So, on a transaction of £10.00, the total charged as transaction fee will be 18p (11p + 7p).

##### Refunds

Card machine providers charge you for issuing refunds to customers. Check the pricing T’s and C’s for your chosen solution.

For example, Dojo charges £0.50 for every refund processed via their card machine.

##### Chargebacks

There are events where customers dispute their value received and request with their card issuer to reclaim their money spent. In such cases, you will incur a fee known as a ‘chargeback’.

You can contend with disputes, however they are automatically processed as a chargeback first and then once contended with, they are only turned over if you have succeeded in your challenge.

##### Currency conversion

For payments taken in an overseas currency, there is a fee taken absorbed within the conversion rate offered.

##### Authorisation fee

Authorisation fees are charged by the customer’s bank to facilitate ID verification against each transaction. The charge is typically somewhere in the region of about 1p – 3p per transaction.

#### Other rental fees

Traditional card machine rental arrangements have gained notoriety for being littered with hidden or unexpected costs.

Whilst it would be inaccurate to assume this is the case with all rental providers, the duty of due diligence is with you to read all the contractual small print before making a commitment.

And on that note, here is a list of the most commonly found ‘additional’ card machine rental costs and charges:

##### Set-up

Sometimes card machine rental providers charge an upfront cost for ‘setting-up’ your account. It’s becoming rarer to see card machine rental providers charge set-up fees. More of them now are actively promoting the fact that their deal carries ‘no set-up fee’.

##### Merchant account

To process card payments via any terminal you’ll need to perform this via an acquiring bank, or merchant account. Aggregators like SumUp or iZettle bundle in the merchant access as a shared service. But the more traditional rental card machine arrangements require you (as the retailer) to set up your own account with a merchant.

Related resource: iZettle Fee Calculator

Setting up your own merchant account is actually a heavily involved process taking several weeks of application lead time, plus locking successful applicants into long term contracts.

##### Online reporting

Some rental providers charge for accessing an online reporting dashboard, which may be useful for visualising your card payment activity.

##### Paper statements

For printed paper statements, a further fee is charged to land a hard copy version.

##### Monthly minimum

Within the terms of rental contracts, it is common that providers will stipulate a minimum monthly amount of sales (by value) to qualify for accessing the deal.

##### Payouts

For money received by your merchant account to be paid into your back account you will incur a payout charge. This is a fee for sending you the money.

##### PCI compliance

A fee that contributes to the work of the Payment Card Industry Security Standards Council who establish the data security standards that payment companies mandate must be used in their industry.

##### Terminal servicing

Maintenance, repair and replacement insurance cover which is a built-in cost element.

##### Early termination

If you exit a card machine rental contract early, there are related financial penalties which recompense the provider for unrealised monies (percentage) due to unfulfilled contractual terms.

#### Interchange ++

Sometimes rental providers publish their transaction fees , broken down in an itemised fashion detailing each contributing cost component of the transaction process.

This style of pricing is called Interchange++.

There are 3 components to the interchange ++ fee breakdown (much like an equation):

1. Interchange = Card issuer fee (single % rate)
2. Plus  = Card scheme fee (base fee & technology fee)
3. Plus = Acquirer fee (card machine provider fee incl. margin)

For example, an interchange of 0.7%, plus card scheme fee of 0.1% and card machine provider fee of 0.3% =

Interchange (0.7%) plus 0.4%

= 1.1% (interchange ++).

This combined result is known as ‘interchange plus plus’.

How does it benefit the most?

This breakdown of cost is an advantage to the savvy, ‘high transactional volume’ card machine user only.

So, if your volume and complexity trade warrants a more granular view on cost, then interchange plus plus will give you greater cost control.

#### Blended costs

For the ‘low transactional volume’ card machine user.

In contrast to the interchange plus plus costs above, blended card machine fees provide a simplified view on transactional cost.

Blended fees are a top line summary of typical transactional costs of the card machine provider.

Blended fees straddle a variety of charges and events dictated mostly to the kind of payment method used.

For example:

• …transactions where a ‘card was present’ i.e. contactless, chip and pin or swipe generally carry a lower transaction fee;
• …whereas transactions where a ‘card was not present’ i.e. via a virtual terminal – payment taken over the phone, typically are charged at higher cost, by comparison

Therefore to give a singular price estimate, blended fees are often quoted as a ‘price range’ where an individual price point is not appropriate.

An example of blended card machine pricing is: 1.5% – 1.85% per transaction (depending on payment method) + 6p

## Card Machine Cost: Example Calculation

Here are is an example ‘cost comparison’ of 5 leading card machines (using a cafe business as the scenario):

### Calculating the card machine cost of a cafe business

• Scenario: A lunchtime cafe with 70 covers turns over £3,675 per week.
• Annual revenue: £176,400.
• Card present transactions: 90% turnover.
• No card present transactions: 10% turnover.

#### Card machine cost comparison table

 SumUp Air iZettle 2 Square Dojo WorldPay Simplicity Duration 18 months usage One-off price £39 £129 £149 - - Monthly fee - - - £20 £17.50 18 month transaction value/volume = £66,150 / 4,777 transactions Single rate 1.69% 1.75% - 1.4% + 5p 1.5% Card present rate - - 1.75% - - No card present rate - - 2.5 - - 18-mth single rate fees £1,117.94 £1,157.63 - (£926.10 + £238.85) £992.25 18-mth card present fees - - £1,041.86 - - 18-mth no card present fees - - £165.36 - - 18-mth monthly fee - - - £360 £315 18-mth TOTAL (+VAT): £1,117.94 £1,157.63 £1,207.22 £1,524.95 £1,307.25

#### Cost analysis & results

In the table above we’ve laid out 5 card machine options (3 owned machines and 2 rental machines):

Owned card machines

• SumUp
• iZettle
• Square

Rental card machines

• Dojo
• WorldPay

Here’s how they line-up in order of cost effectiveness (starting with the cheapest – over an 18 month period):

1. SumUp Air (owned machine): £1,117.94 = cheapest
2. iZettle 2 (owned machine): £1,157.63 (+£39.69)
3. Square (owned machine): £1,207.22 (+£89.28)
4. WorldPay (18 month rental contract): £1,307.25 (+£189.31)
5. Dojo (rental machine): £1,524.95 (+£407.01) = most expensive

*These cost outcomes apply only to this case study example.

#### Conclusion

So, in the case of this cafe business above the cheapest card machine offer would be SumUp Air. At the least, saving £39.69 (over the 18 month duration of use) against the nearest contender, iZettle 2. And at the most saving £407.01 against Dojo card machine.

(Note: Bear in mind that the comparison above was conducted over 18 months of use. Whilst this is the cost profile for our example cafe business with £176,400 sales over 18 months of use – had our example been a pop-up shop, open for a few days or a business with much larger sales, the comparison exercise would yield completely different results. The purpose of the comparison above was to suggest a method by which you might approach estimating your card machine cost.)

## Final advice on: How much does a card machine cost?

Card machine cost is dependent on both your use and the providers fee structure.

The factors of card machine usage that will affect your cost the most (in order of importance) will be:

1. how long you intend to use the machine
2. what value and volume of sales you expect the machine to take in that period
3. what types of transaction you intend to take (card present vs. card not present)
4. which cards (and currencies, if applicable) you expect customers to use the most

But, in short – as a general rule of thumb, you can expect that:

Rental machines with lower transactional costs but contractual lock-in will work out cheaper if you are committed to trading throughout the contracted duration and your sales value is high enough for the saving to make a difference.

Owned machines with higher transactional costs but no lock-in will work out cheaper if you don’t expect to trade for the length of a rental contract and your sales value doesn’t warrant locking-in either.

It’s also worth pointing out though that card machine providers offer bespoke pricing if you expect your business to take more than £200k per annum. So this is a critical threshold to consider when assessing cost of running your card machine.

Lastly, always check the small print and run some example costing exercises on paper before approaching a card providers sales team. This way you are prepared to ask all the relevant questions and will avoid hasty and costly decisions.

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