POS Pricing Explained
POS pricing is intentionally confusing. Providers advertise low starting prices while burying fees in fine print. This guide breaks down every cost component so you can calculate your true total cost of ownership.
Software Fees (Monthly)
Most POS systems charge monthly subscription fees for their software. These range from $0 (Square basic) to $300+/month for enterprise features. Higher tiers typically add features like advanced reporting, loyalty programs, and multi-location management.
- •Free tier: Square, Toast Starter (limited features)
- •Standard: $29-89/month (most features you need)
- •Premium: $100-300/month (enterprise, multiple locations)
- •Per-location fees: Many charge extra for each location/register
Payment Processing Fees
This is usually your biggest ongoing cost. Every card transaction incurs a fee, typically 2.3-3% + a fixed amount per transaction. On $500K annual sales, the difference between 2.5% and 3% is $2,500/year.
- •Flat-rate: 2.6% + 10¢ (Square), 2.49% + 15¢ (Toast) - simple, predictable
- •Interchange-plus: Actual card cost + markup - cheaper for high volume
- •In-person vs online: Online transactions cost more (2.9% vs 2.6%)
- •Keyed-in: Manually entered cards cost most (3.5%+)
Hardware Costs (Upfront)
Hardware ranges from $0 (use your phone) to $3,000+ for full restaurant setups with kitchen displays. You can often start cheap and upgrade later.
- •Free/cheap: Tap to Pay on phone, $49-99 card readers
- •Mid-range: $150-500 for tablet stand + reader
- •Full terminal: $800-1,500 for all-in-one register
- •Restaurant setup: $2,000-5,000 with kitchen displays
Hidden Fees to Watch
The advertised price is rarely the full price. Watch for these commonly hidden costs that can add hundreds to thousands annually.
- •PCI compliance fees: $50-200/year (some include, some charge)
- •Chargeback fees: $15-25 per dispute
- •Statement fees: $5-15/month (often waivable)
- •Early termination: $250-500+ if you cancel contract early
- •Equipment leases: AVOID - you pay 3-5x the equipment value
Add-On Feature Costs
Base prices often exclude features you'll want. Loyalty programs, advanced reporting, online ordering, and team management frequently cost extra.
- •Loyalty programs: $0-45/month (Square free basic, others charge)
- •Online ordering: $0-100/month + per-order fees sometimes
- •Payroll: $30-50/month + per-employee
- •Marketing tools: $15-50/month
- •Third-party apps: Varies widely
Calculate Your Total Cost
Add up all components to compare systems fairly. A 'free' system with 3% processing may cost more than a $50/month system with 2.5% processing if you have decent volume.
- •Formula: (Monthly fee × 12) + (Annual sales × processing rate) + hardware + add-ons
- •Example: $50/mo + ($300K × 2.6%) + $500 hardware = $8,900/year
- •Compare: Get quotes from 2-3 providers with YOUR numbers
- •Negotiate: High-volume businesses can often negotiate rates
Common Mistakes to Avoid
Focusing only on monthly fees
Processing fees usually dwarf monthly subscription costs. A 'free' system isn't free.
Leasing equipment
Equipment leases are almost always terrible deals. You'll pay 3-5x the purchase price. Buy outright.
Ignoring per-transaction fixed fees
The '+ 10¢' per transaction adds up, especially for low-ticket items. A $5 coffee with 2.6% + 30¢ has an effective rate of 8.6%.
Not negotiating
If you process $20K+/month, ask for better rates. The worst they can say is no.
Frequently Asked Questions
What's a good processing rate?
For in-person transactions, 2.5-2.7% is competitive for small businesses. High-volume businesses ($50K+/month) should push for 2.3% or interchange-plus pricing.
Are there really free POS systems?
Square's basic software is genuinely free—no monthly fees. But you pay processing fees on every transaction (2.6% + 10¢). There's no truly free lunch; they make money on processing.
Should I lease or buy hardware?
Buy. Always buy. Equipment leases are predatory—you'll pay $3,000+ for a $800 terminal over the lease term. If you can't afford to buy, use a cheaper option like an iPad + reader.