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The break-even monthly turnover is the rental fee divided by the rate gap. With rental fees from £2.99 to £20 and a typical rate gap of 0.5%, break-even ranges from £598 to £4,000. Below that, pay-as-you-go is cheaper; above it, rental wins.
The break-even point between monthly rental and pay-as-you-go card machines is calculated by dividing the rental fee by the rate difference, with typical break-even turnovers ranging from £598 to £4,000.
KEY FACTS
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LAST REVIEWED 2026-09-06
The two models
Card machine pricing generally falls into two models: monthly rental and pay-as-you-go (PAYG). Under a rental contract, the business pays a fixed monthly fee for the terminal hardware, and in return receives a lower transaction rate. The rental fee covers the cost of the device, maintenance, and support, and is typically charged for a minimum term. Under PAYG, the business pays no monthly rental, but the transaction rate is higher to compensate the provider for the cost of the hardware.
The choice between the two depends on transaction volumes. For low-volume businesses, the higher PAYG rate may still cost less than paying a monthly rental on top of a lower rate. For high-volume businesses, the lower rate under rental can more than offset the monthly fee. The key is to identify the break-even point, where the total cost under both models is equal.
Providers often advertise both options, but the rates and fees vary. It is essential to compare like-for-like, including any additional charges such as setup fees, PCI compliance fees, or early termination fees. The break-even calculation provides a clear basis for comparison.
Break-even formula
The break-even point is calculated by comparing the total monthly cost of each model. For rental, the total cost is the monthly rental fee plus the transaction rate multiplied by monthly turnover. For PAYG, the total cost is simply the PAYG rate multiplied by monthly turnover. Setting these equal and solving for turnover gives the break-even formula:
Break-even monthly turnover = Rental fee ÷ (PAYG rate - Contract rate).
The denominator is the rate gap, expressed as a decimal. For example, if the PAYG rate is 1.5% and the contract rate is 1.0%, the gap is 0.5%, or 0.005 in decimal form. If the rental fee is £10, the break-even turnover is £10 ÷ 0.005 = £2,000. This means that for monthly turnovers below £2,000, PAYG is cheaper; above £2,000, rental is cheaper.
The formula assumes that all other costs are identical, which may not always be the case. Some providers charge additional fees for rental contracts, such as setup or maintenance, which should be included in the rental fee for accuracy. Similarly, PAYG may have no monthly fee but could include higher per-transaction costs. The formula provides a starting point for comparison.
Break-even with current rates
Using current market rates, the break-even point can be illustrated. Rental fees typically range from £2.99 to £20 per month. The rate gap between PAYG and contract rates varies, but a common gap is around 0.5 percentage points. For a rental fee of £2.99, the break-even turnover is £2.99 ÷ 0.005 = £598. For a rental fee of £20, the break-even is £20 ÷ 0.005 = £4,000.
Thus, for a business with monthly card turnover below £598, PAYG is almost always cheaper, even with the lowest rental fee. For turnovers between £598 and £4,000, the decision depends on the specific rental fee. Above £4,000, rental is likely to be cheaper, assuming the rate gap is at least 0.5%.
It is important to note that rate gaps can be larger or smaller. Some providers offer contract rates as low as 0.3% for high-volume businesses, while PAYG rates can be as high as 2%. In such cases, the break-even point shifts. The table below shows break-even turnovers for various rental fees and rate gaps.
| Rental fee (monthly) | Rate gap | Break-even monthly turnover | Source |
|---|---|---|---|
| £2.99 | 0.5% | £598 | Calculated from provider rates |
| £10 | 0.5% | £2,000 | Calculated from provider rates |
| £20 | 0.5% | £4,000 | Calculated from provider rates |
| £20 | 1.0% | £2,000 | Calculated from provider rates |
Source: Provider rate data as of publish date.
Rental fees and what they include
Monthly rental fees for card machines typically range from £2.99 to £20, depending on the terminal model and provider. The fee usually covers the hardware, maintenance, and technical support. Some providers include software updates and PCI compliance assistance. However, not all fees are inclusive: some contracts may charge extra for setup, delivery, or early termination.
The Payment Systems Regulator (PSR) introduced remedies in July 2023 to improve transparency in the card acquiring market. These include summary boxes and trigger messages to help businesses understand contract terms. The PSR also capped initial terminal rental terms at 18 months, meaning providers cannot lock businesses into longer initial terms. This gives businesses more flexibility to switch providers if they are dissatisfied.
When comparing rental fees, it is important to consider the total cost over the contract term. A lower monthly fee might be offset by a higher transaction rate or additional charges. Businesses should also check whether the rental fee is fixed for the entire term or subject to increases. The PSR's remedies aim to make such terms clearer.
Hardware purchase as a third route
Instead of renting or using PAYG, businesses can buy a card machine outright. This involves a higher upfront cost, but no monthly rental fee. The transaction rate is typically the same as a contract rate, since the business owns the hardware. This can be cost-effective for businesses with high turnover, as they avoid the rental fee entirely.
The break-even analysis for purchase versus rental is different. The upfront cost must be divided by the monthly rental saving to find the payback period. For example, if a terminal costs £300 and the monthly rental would be £10, the payback period is 30 months. After that, the business saves £10 per month. However, the terminal may become obsolete or require maintenance, which could add costs.
Purchasing also gives the business the freedom to switch providers without penalty, as there is no rental contract. This can be advantageous in a market where rates change. The PSR's remedies, including the 18-month cap on rental terms, aim to reduce barriers to switching, but owning the hardware removes that barrier entirely.
Seasonal businesses
Seasonal businesses face unique challenges when choosing between rental and PAYG. A business with high turnover during peak seasons but low or zero turnover in off-seasons may find that PAYG is more flexible, as there is no monthly fee to pay during quiet months. In contrast, a rental contract typically requires a fixed monthly payment regardless of turnover, which can be a burden in the off-season.
Some providers offer seasonal payment plans, allowing businesses to pause rental payments during off-peak periods. However, not all providers do, and the PSR's 18-month cap on initial terms does not address payment flexibility. Businesses should check the contract terms for any seasonal adjustment options.
For a seasonal business, the break-even calculation should be based on annual turnover rather than monthly. If the annual turnover is high enough to justify rental, but the monthly turnover varies, the business might still prefer PAYG to avoid negative cash flow in off-peak months. Alternatively, purchasing the terminal outright could be a better option, as it eliminates monthly fees entirely, allowing the business to pay only transaction costs when trading.
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Disclaimer. This guide is editorial information drawn from primary sources. It is not financial, legal or tax advice and does not recommend any provider. Figures are those published by the named sources on the review date and may change. Kael Tripton Ltd receives no commission, referral fee or lead payment from any provider named on this page. |
Frequently asked questions
Is renting a card machine worth it?
Renting a card machine can be worth it if your monthly turnover is high enough that the lower transaction rate saves more than the rental fee. Use the break-even formula: divide the monthly rental fee by the difference between the PAYG rate and the contract rate. If your turnover exceeds that break-even point, rental is likely to be more cost-effective. For low-volume businesses, PAYG may be cheaper. Consider also the flexibility of rental terms, which are now capped at 18 months by the PSR, and whether you need the latest hardware.
Can I buy a terminal outright?
Yes, many providers allow you to purchase a card machine outright. This involves a higher upfront cost, but you avoid monthly rental fees. The transaction rate is typically the same as a contract rate, since you own the hardware. Buying outright can be cost-effective for high-volume businesses, as the payback period is calculated by dividing the purchase price by the monthly rental saving. It also gives you the freedom to switch providers without penalty. However, you are responsible for maintenance and upgrades.
What does terminal rental include?
Terminal rental typically includes the hardware, maintenance, and technical support. Some providers also include software updates and PCI compliance assistance. However, not all fees are inclusive: setup fees, delivery charges, and early termination fees may be extra. The Payment Systems Regulator (PSR) introduced summary boxes and trigger messages in July 2023 to make these terms clearer. Always read the contract to understand what is covered and for how long, as initial terms are now capped at 18 months.
Is rental capped at 18 months?
Yes, the Payment Systems Regulator (PSR) has capped the initial term for POS terminal rental and lease contracts at 18 months. This means providers cannot lock you into a longer initial term. The remedy came into force in July 2023 as part of broader measures to improve competition in the card acquiring market. After the initial term, you may be able to switch providers or negotiate new terms without penalty. This gives businesses more flexibility and reduces the risk of being tied to an unsuitable contract.
Can I pause rental in the off-season?
Some providers may offer seasonal payment plans that allow you to pause rental payments during off-peak periods, but this is not standard. You will need to check the terms of your contract. The Payment Systems Regulator (PSR) does not mandate such flexibility, so it is up to individual providers. If you run a seasonal business, consider pay-as-you-go options, which have no monthly fee, or purchasing a terminal outright to avoid fixed costs during quiet months. Always ask providers about seasonal adjustments before signing.
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