Do Credit Card Readers Have Fees?
Let's break down credit card reader costs and fees, and learn how to choose the right fee structure for your small business.
A credit card reader is a device that accepts debit and credit card payments in various settings and lets you take payments wherever you happen to be doing business. Though all point-of-sale setups contain card-reading equipment, when we discuss “credit card readers,” we’re discussing portable devices that can be used independently of a full countertop-bound register.
But of course, all good things have a cost, so if you’re asking, “Do credit card readers have fees?” the answer is yes.
From the cost of the reader to the cost of POS software to the cost of payment processing, there are several costs associated with card readers.
How Much Does A Card Reader Cost?
There are three components to the cost of using a credit card reader:
- The cost of the card reader itself
- The cost of point-of-sale (POS) software
- The cost of payment processing
Credit Card Reader Pricing
Small, mobile credit card readers — the kind that need to be paired with a smartphone or tablet running POS software — generally cost between $29 and $120. Most of these devices can take EMV (chip card) and NFC (contactless) payments, and some can still take magstripe payments.
If you want a free credit card reader, one of the few genuinely free options is the Square Reader for magstripe. It’s a tiny magstripe-only device that connects directly to your smartphone.
Both the device and Square’s POS are free, making it a great backup reader in case your leading POS goes down — even if you never end up using it, you won’t be out any money.
However, magstripe technology is outdated from a security standpoint, so you’ll only want to use it for occasional payments.
If you want a mobile card reader that you don’t have to pair with your phone, consider a smart terminal. As we explain in our rundown of the various types of credit card readers available, smart terminals have touchscreens and the ability to run POS software natively.
Smart terminals are pricier than mobile card readers, however. Basic models sell for $199-$499, while more advanced (often industry-specific) mobile terminals can go for $800 or more.
Note that some merchant services providers offer “free” card readers, terminals, and other processing equipment, but the catch is that you either have to agree to a multi-year contract or a higher processing rate.
This isn’t the case with Square’s free reader, though.
To take payments with a mobile card reader or smart terminal, you need a POS software application. Some merchant services providers offer readers that only work with the company’s own POS software, while other readers can be used with a variety of POS apps.
There are many free POS apps currently available. With so many options out there, small businesses should be able to find a free POS app that meets their needs.
However, as your business expands, you may find that you require the kind of advanced functionality that only a paid POS system can provide. Should you need more than what a free POS can provide, the cost of POS software can run up to $300/month or more.
Pricing For Payment Processing
The cost of payment processing is a complex, multi-faceted subject, but we’ll try to keep things relatively simple here.
Payment service providers (PSPs) like Square, PayPal, and Stripe are popular all-in-one processing options for newer and smaller businesses, as you can quickly get approved for an account and a card reader. PSPs generally don’t charge monthly or annual fees for basic services.
PSPs typically offer flat-rate pricing. With flat-rate pricing, a percentage rate and (usually) a fixed fee are taken from each transaction you process. For card-present transactions taken with card readers/terminals, the percentage fee varies from 2.2% to 2.8%, while the fixed per-transaction fee, when it exists, varies from 5 to 15 cents. A few providers don’t change a fixed per-transaction fee.
However, since PSPs can have issues with account stability, many businesses (particularly larger ones) may want a unique merchant account instead. Most of our favorite merchant account providers offer interchange-plus pricing, which is tough to describe succinctly. However, IC+ pricing is transparent and is often cheaper on a per-transaction basis than flat-rate pricing, which is why we prefer it.
The merchant account vendors that offer interchange-plus pricing often charge monthly and annual fees that PSPs don’t charge. Still, even when taking these fees into account, most mid-sized and large businesses should spend less on processing with IC+ pricing than with flat-rate pricing.
Other merchant account providers offer membership pricing similar to interchange-plus pricing. The difference is that, essentially, you pay a lower per-transaction rate and instead pay a monthly membership fee. This can work to the benefit of large businesses with high processing volumes.
Finally, there’s tiered pricing. Tiered pricing is opaque and does not work to the benefit of merchants. We advise avoiding it if at all possible. Unfortunately, if your business is considered high-risk, an account with tiered pricing may be the only type of processing account you can get.
Choosing The Best Credit Card Reader
Now that you know how to navigate credit card reader fees, you’ll want to walk that information into your decision-making as you search for the best credit card reader for your small business.