For a long time I compared card quotes the way everybody compares them, by putting the percentages side by side. I had assumed the terminal line was a separate argument. It is not, and the free terminal uk providers advertise is usually a rental with the price moved somewhere you were not looking.
This is the corrected version, with the 1 division that finds the money.
What free normally means on a quote
A free terminal offer arrives with a floor attached. It is called a minimum monthly service charge. The rental line disappears and a floor appears underneath your card fees. In a busy month the floor does nothing at all. Your percentage charges clear it without help. In a quiet month the floor is the bill.
That is the whole of the trick. It is not a dishonest one. The provider still has a terminal to buy and a margin to earn. What changed is that the cost moved from a line you would have compared into a line most people never model, and comparison sites do not model it either.
The regulator fixed the length of the rope, not the price
The Payment Systems Regulator looked at exactly this market and published its final decision in October 2022, PS22/2. Paragraph 2.60 is the one to know. It confirmed that "duration of POS terminal lease and rental contract initial minimum term periods should be no greater than 18 months", and that after the initial term contracts which do not end must move to "rolling renewal terms of no greater than 31 calendar days".
That remedy applies to merchant customers of the directed providers "with an annual card turnover of up to £10 million", which is every shop this site is written for and then some.
The transparency remedies reach a good deal further. Summary boxes and online quotation tools apply to merchants with card turnover up to £50 million, per paragraphs 2.8 and 2.18. The directions went to "the 14 most significant providers of card acquiring services", covering "around 95% of transactions for the merchants our remedies will protect", which is paragraph 2.11.
Read all of that and notice what is missing, because the absence is as deliberate as the presence: nothing anywhere in the decision caps a minimum monthly service charge, or a PCI fee, or an authorisation fee, or any other number on the statement. The regulator fixed how long you can be tied and what you must be shown. It left the number itself alone, which is the correct division of labour and also the reason this article exists.
The arithmetic that finds the floor
One division answers the question, and it takes 30 seconds. Break-even card turnover equals the minimum monthly charge divided by your effective rate.
Take a minimum of £25 and an effective rate of 1.4 per cent. Twenty five divided by 0.014 is £1,786, and that is the number to write on the inside of the till drawer. Below £1,786 of card turnover in a month you are paying the floor rather than the rate, and every pound of that gap is the terminal you were told was free.
Run it the other way for the total. The initial term can be 18 months under paragraph 2.60, so the least a £25 floor can cost you across a full term is £450 before a single transaction. A terminal rental at £22 a month over the same 18 months is £396. The free one is dearer, and it is dearer by an amount that appears in neither quote, because one document has a rental line and the other has a floor and no comparison table anywhere in this market puts those both of those in the same column.
I want to be careful here, because a worked example is not evidence about anybody: those are my own figures on stated inputs and not a claim about any named provider, its pricing or its contracts. Put your own minimum and your own effective rate into the same division. The answer is yours rather than mine.
Where the floor bites, by minimum and by rate
The table below runs the same division across the minimums and rates I see most often. Read down to your minimum, then across to your rate. The number where they meet is the monthly card turnover at which the floor stops costing you anything extra.
| Minimum monthly charge | At an effective rate of 1.0% | At 1.4% | At 1.8% |
|---|---|---|---|
| £15 | £1,500 a month | £1,071 | £833 |
| £20 | £2,000 a month | £1,429 | £1,111 |
| £25 | £2,500 a month | £1,786 | £1,389 |
| £35 | £3,500 a month | £2,500 | £1,944 |
A digression about January
Card turnover in a shop is not flat and the floor does not care. A hairdresser doing £4,000 a month through the machine from March to November is nowhere near a £25 floor at 1.4 per cent, and then January arrives at £1,200 and the floor takes £8 that the rate would not have taken. Small money, repeated, in the month you can least afford it, and invisible in the eleven months when you could.
I keep thinking about how the same shape turns up in every one of these contracts, in the terminal rental and the minimum charge and the PCI fee, always designed so that the month it costs you most is the month you have the least attention to give it. It is invisible when trade is good. Nobody reads a statement in December. Anyway, back to the paperwork.
The message that is supposed to wake you up
There is a third remedy in PS22/2 and it is the one aimed at the moment the tie ends. Providers must send trigger messages "to prompt merchants to shop around and/or switch", shown prominently in the online account, with timing "linked to minimum contract term expiry dates". Where a contract has no expiry date, a trigger message must arrive "at least once every 30 calendar days".
I printed that page and read the surrounding 6 paragraphs twice, because I wanted to know whether the message has to say anything specific about your own price. As far as I can tell from the decision it prompts you to shop around rather than telling you what you currently pay, and the price detail lives in the summary box instead. I cannot tell you how a given provider words its own version, and I have not seen enough of them to generalise.
So the design has a shape. A box with your numbers, a tool to compare them against, and a nudge timed to the date your contract stops holding you. On a free terminal deal the nudge lands 18 months in, which is exactly when the floor has finished paying for the hardware.
Working out the rate the division needs
The break-even sum only works if the rate you put into it is real. Your effective rate is every card charge for the month divided by the card turnover for the same month, multiplied by 100, and it includes the authorisation fees, the PCI fee, the minimum charge itself if it bit, and anything else on the card side of the statement.
Do it for a second month as well. Take a busy month and a quiet one, because the fixed lines barely move while the turnover does, and the gap between the answers tells you how exposed you are to a floor. A shop I would describe as typical comes out somewhere between 1.1 and 1.9 per cent on a debit heavy mix, which is why the table below runs across that band rather than quoting one number.
If your statement shows a single blended percentage and nothing else, that number is not your effective rate either, because it excludes the fixed lines. It took me most of an afternoon on a friend's statement to separate the two, and the difference was 0.3 percentage points.
What to ask before you sign the free one
Ask for the summary box. It is not a favour. You do not need to give a reason for wanting it. Paragraph 2.18 puts merchants up to £50 million of card turnover inside that remedy, and the box has to contain bespoke price and non-price information for your own account rather than a marketing sheet.
Ask what the minimum monthly service charge is, in pounds, and get it in writing. If the answer is that there is not one, get that in writing too, because a quote with no floor and no rental is a genuinely different product from the one I have described here.
Ask when the initial term actually ends. Under 2.60 it cannot exceed 18 months for a merchant under £10 million, and after it the rolling term cannot exceed 31 calendar days, which means your notice window is short and frequent rather than annual.
Ask what leaving early costs you. I have not found a published cap on exit fees in PS22/2, and I read the remedies section twice looking for one. What the decision does is limit the length of the tie rather than the price of breaking it early, so the number has to come from your own contract.
The comparison I would actually run
Two quotes on one page, with the same 4 lines under each. The effective rate you expect on your own card mix. The minimum monthly service charge, in pounds. The rental, if there is one. The length of the initial term.
Then multiply the floor by 18 and put that number next to the rental multiplied by 18. On the inputs above, £450 against £396, and the difference is small enough that the percentage difference between the two quotes might swallow it. That is the point. Neither line decides on its own, and comparing either one alone is how a shop ends up paying more for free equipment.
My instinct is that most owners have never done this multiplication, because the numbers live in different documents and nobody joins them. That is a guess and I am recording it as one.
What I could not find out
I could not find a published figure for how many UK merchants are on a minimum monthly service charge, or what the median floor is. The market review that produced PS22/2 is dense with fee data and I did not find that particular pair of numbers in it, which surprised me, because the remedy on contract length suggests somebody measured the harm.
If a provider publishes its minimum in its own summary box, and the boxes were designed for comparison, then the data to answer this exists in tens of thousands of merchant accounts and nowhere in public. I find that mildly absurd, and I am recording the gap rather than filling it with a guess.
Take the two quotes you are choosing between and write the same short list under each. The effective rate you expect on your own card mix, the minimum monthly charge in pounds, the rental if there is one, and the length of the initial term, which cannot exceed 18 months if your card turnover sits under £10 million. Anything a salesperson tells you that does not fit in those four boxes is not a price, it is a story about a price.
The one number I would put on your wall is the break-even. Twenty five over 0.014, or your own two figures, and the month your turnover drops below the answer is the month your free terminal starts charging you rent.