A customer pays using a credit card reader

Choosing the Right Point of Sale System for Your Business

There are countless amounts of Point of Sales systems available in the market currently. Choosing a POS system for your business is a decision that should not be taken lightly. After all, the lifeblood of any business is sales and arguably the most important aspect of sales is the ability to actually accept payments from your customers.

Not all Point of Sale systems are created equal, and not all businesses require systems with features they are never likely to use. For example, the ability to track inventory for a service-based business is usually not useful, nor is the ability to invoice customers for a purely retail-based business. Once you know exactly what features you need to run your business most effectively, you then need to find the right system for you and avoid some potentially expensive pitfalls.

Here are some of the things to avoid.

POS Systems Built by or Locked to a Specific Merchant Processor

While many Point of Sale systems are agnostic as to who you choose to process your payments with, there are many options that require you to use a specific merchant provider. They do this to blur the lines between a Point of Sale system provider and a merchant processor to take in more revenue. This presents many issues.

a. No Competition. The POS provider has built into their business model the revenue they generate from the credit card processing fees they charge. Removing the possibility for competition integrating into their POS almost guarantees that the rates you will be paying will not be competitive. While the cost of the POS may seem very tempting, when you factor in the processing fees, the POS can become VERY expensive. We have some specific examples of these situations where we discuss POS providers later in this article.

b. No guarantees on processing rate increases. It is very common for Point of Sale systems to sign exclusive deals with processors (if they aren’t one themselves), and once their portfolio grows large enough they sell them directly to the processor. Due to the fact that rates are not guaranteed for any period of time, the purchaser of said portfolios will raise rates immediately following their acquisition to hasten their profitability. The overall goal  is to get merchants to be reliant on their Point of Sale system that has non-competitive processing fees in order to make it more difficult to switch to another processor. Changing POS systems is a huge hassle that these companies like to take advantage of. Some POS providers deploy as many pieces of equipment as they possibly can, knowing that they will become very profitable once they start increasing rates down the road. Square is a good example of this tactic.

c. Contracts. Point of Sale systems frequently come with contract terms from 1-3 years with auto renewals. This means that some POS providers purposely lock you into a contract to guarantee themselves cashflow for years. This can be a very costly mistake. Unless your options are severely limited due to specific functions you require that only these POS systems provide, avoid non-cancellable contracts at all costs.

Point of Sale Systems that Require Contracts with Cancellation Fees

Regardless of whether or not you are able to use your own merchant processing company, it is common for a POS provider to charge a monthly fee for using their system. If the Point of Sale system turns out to be the wrong one for your business and you are contractually obligated to make payments for a year or more, it can become very costly. Contracts are only useful to dissuade you from switching POS providers and greatly benefit the POS provider.

Avoid contractual obligations wherever possible and only work with companies that allow you to leave, without penalty, the moment you no longer feel they are a fit with your business.

While avoiding Point of Sale System exclusivity agreements and non-cancellable contracts are important, there are things that should be expected. For example:

Monthly Fees While Using the POS System

Some POS providers will give you their point of sale system hardware for free up-front and you may pay them a monthly “Rental” or “Lease” payment. Others may charge you for the equipment AND a monthly fee on top. These fees could be anywhere from $50 a month to $500 a month depending on the POS system. Just pay VERY close attention to terms of any contact you sign and how long you are obligating your business to pay these fees. Ideally, the fees should stop the moment you stop using the system.

Up Front Purchase of Equipment

Point of Sale system manufacturers frequently charge for all of the hardware as part of their normal business practice. Keep in mind that POS systems can range from $1,000 to $60,000+. The cost will depend on the POS system your business needs for daily operations, and typically the more features and complexity, the higher the costs.

Service Contracts

Some of the larger POS systems require service contracts. This means that if you ever need support for their hardware you will need to have a service contract in place so that you are able to call and get technical support. While this seems unreasonable on the surface, there are systems that require a lot of integration with an internet service provider and the processor winds up being the primary contact for the merchant’s entire internet infrastructure. Again, this is usually for enterprise level merchants.

Below are case studies on some of the most popular Point of Sale systems in the marketplace.

  Toast – Contractual Obligation, Processor Locked, High Processing Fees, Rate Changes, Good Features

Source: Toast Merchant Agreement

(Worst) Toast - Contractual Obligation, Processor Locked, High Processing Fees, Rate Changes, Good Features

Toast is an all-in-one point of sale system that caters to restaurants specifically. The system is quite robust and offers a lot of features.

We don’t want to go into what the Toast POS can or cannot do because at the end of the day, it is up to the merchant to decide what is best for their business in terms of POS function and it should be researched thoroughly. What we want to focus on is what the POS will actually cost a merchant to use and what could potentially go wrong.

Contractual Obligation Toast requires a 1-3 year contract (usually 3 years) with hefty early termination fees that are equal to the total cost of the hardware that has been provided along with all of the income that they would have earned from the merchant over the period of the ENTIRE agreement.

As an example, if a merchant uses hardware that costs $200 a month that’s a termination fee of $7200 PLUS the lost profit on the processing fees. If your business does $50,000 a month and Toast earns a profit of $385 (.77%, see below) a month on the processing, that can add an additional $13860 bringing the total early termination fee to $21,060. Believe it or not, this is actually a cheap example. When obtaining a quote from Toast, just multiply your monthly obligation by the term of the agreement in months to get the cancellation fee on their monthly equipment fees.

Processor Locked- Toast has an agreement with Vantiv and locks their POS to only be able to be used through their ISO agreement with Vantiv so that they can earn all the processing profit. This means that no other processor can integrate with Toast, and thus you are beholden to whatever merchant processing rates that are provided, which from what we found are very expensive.

High Processing Fees- As expected based on long contract terms and a locked system, Toast’s processing fees are not competitive with the rest of the merchant processing market. On their website they give an example of what a typical transaction could look like.

Payment Processing Fee

This example assumes you will pay 2.69% for a swiped transaction of $100 with $0.77 cents of that being profit to Toast that they elegantly call “Reinvested in Toast.” That is a profit of 77 basis points on the surface, which is very expensive as is. However, this also assumes that the Interchange (Hard Cost) on the sale is 1.92%. There are many situations where this would be a much worse deal. For example, when a merchant accepts a regulated debit card the Interchange cost is only .05% + $0.22 which would be a cost of only $0.27. That would mean that Toast makes a whopping 2.42% profit! Read More about how pricing works.

Card-Not-Present or Keyed in transactions are 3.50% according to multiple quotes we have seen from Toast’s sales department. While Interchange is more expensive on Keyed sales, there is still a LOT of profit with these spreads.

Toast does offer to “Meet or Beat” rate proposals from other merchant processors, but this is completely negated by Toast’s ability to change rates whenever they want.

Rate Changes- Toast reserves the right to change any of their fees and processing rates with 30 days written notice. While they do allow you to cancel your service without any termination fees if you object to having your fees raised, you have to do so in writing before the effective date of the change (30 days from notice). This means that you have to be on top of every notice that Toast sends you and be prepared for rate increases that do not have limits. If you object to the rate increase you will be forced to scramble to implement a new Point of Sale system into your business which is the exact environment Toast is trying to create in order to keep you as a client regardless of how expensive their service is.

Good Features Toast has a ton of features built specifically for restaurants. Pay at the table has become popular due to the fact that you can accept a tip at the time of the sale. This has some ramifications on Interchange costs since the Tip is run at the time of the sale, you do not have to adjust the transaction for a higher amount than was originally authorized and you can avoid potential downgrades to higher Interchange categories.

While Toast may be a great Point of Sale system in function (or so we hear), it is a terrible option based purely on having control of your business’s payment system. Your rates can be raised at any time, your processing rates are non-competitive, you are contractually obligated to work with them, and you are not able to use any processors that may be much cheaper. Consider these things very carefully before making a decision to work with Toast.

An excellent resource to get more information about Toast’s Rates and Fees, as well as get real examples of quotes you can visit. https://reformingretail.com/index.php/2018/09/11/are-toasts-early-termination-fees-usurious-or-expected/

Square- Processor Locked, High Fees (Sometimes), Rate Changes, No Contract, No Monthly Fees, Great Features

quare- Processor Locked, High Fees (Sometimes), Rate Changes

Square is a market leader in both merchant processing and quality Point of Sale systems. The hardware looks very clean and gives a very professional look to a business. It also speeds up customer interactions and increases revenue by allowing a customer to tip on transactions that they normally would not, such as for take out restaurants. While Square is an Excellent option for some merchants, it could be a costly option for others.

Square is a payment processor as well as a point of sale system manufacturer. They operate as what is known as a payment aggregator. This means that all transactions flow through one centralized merchant account rather than each merchant having their own merchant identification number (MID).  Paypal is another well known payment aggregator. While there are benefits to working with a payment aggregator such as fast and easy setup and transparent pricing, there are also drawbacks. Square is known to close merchant accounts and hold user funds if they deem your business to be risky, at their discretion. While most merchant processing companies are able to do this, Square is usually a lot more aggressive in shutting accounts down.

Here are some important considerations to keep in mind 

Processor Locked-   Square is a merchant processing aggregator and as such only allows you to process through them when using their point of sale system.

High Fees (Sometimes)- Square’s current pricing, as it is found on their website at the time of this article’s publication, is 2.60% + $0.10 per transaction for card present transactions and 3.50% + $0.15 for keyed in transactions. There is also a fee for their point-of-sale register which is either a $799 purchase or $39 a month for 24 months.

While the cost for the Register is very reasonable, the processing rates may or may not be. It really depends on your business’s average sale (ticket) and average monthly volume. Square does not charge any monthly fees, which can make a big difference compared to traditional processing accounts. Here is an example of Square’s pricing vs our subscription-based pricing. 

As you can see by these pricing examples, it takes some math to figure out what works out best for a merchant when monthly volume is on the lower side, and the difference isn’t usually very large unless monthly volume is very low. However, as monthly volume grows the pricing difference is much larger and subscription-based pricing is hands down cheaper.

As merchant volume grows, the difference in rates becomes very apparent.

Rate Changes- There was a time when Square was much cheaper than it is today. On November 1st 2019 Square updated its swiped rate from 2.75% to 2.60% + $0.10. This change had a huge impact on merchants, especially merchants that have low average tickets. Any merchant that has an average ticket below $70 was impacted negatively by this pricing update.

By adding a transaction fee Square significantly increased its profitability on small merchants. It is difficult to assess how much of an impact this made by looking at Squares quarterly report since the change was made a month before the next report was released and right before a major holiday (Christmas). However, we can compare from one year to the next using Transaction-Based Revenue and Transaction-Based Costs. ransaction fee Square significantly increased its profitability on small merchantshttp://s27.q4cdn.com/311240100/files/doc_financials/2020/q4/Square-10K-2020.pdf 

As we can see, Square’s Transaction-Based revenue jumped up 11.64% while their Transaction-Based Costs only increased by 3.09%, Netting a difference of roughly 80 million Dollars for just one quarter!

Consider whether or not a processor has the ability to change your rates in the future. It makes a big difference. 

No Contract, No Monthly Fees, Great Features- Clover does not require contracts though if you finance the system with a monthly fee some terms and conditions may apply in regards to that financing agreement. They also do not charge any monthly fees which was a great deal when the rates were a flat 2.75% and although it may not be the most competitive now when coupled with their new rates, it is still nice to not have to pay a dime until you actually have a sale.

Square also features an application marketplace that lets you download apps that provide features that you may need for your business such as Auto Tip Distribution Software, Analytics tools, and even industry specific POS applications for Restaurants, Healthcare, and Insurance businesses.

See Here


Overall, Square is a good option for merchants that process less than $7,500 a month in revenue that are looking for a sleek and well-designed system. Clover can be tailored to almost any business type and gives merchants analytic tools that you don’t get with a regular credit card terminal. 

5 starClover- Platform Locked, Low Fees, No Contract, Great Features 

(Worst) Toast - Contractual Obligation, Processor Locked, High Processing Fees, Rate Changes, Good Features

Clover is one of the most popular point of sales systems in the market today. They can be tailored to almost every business type and they have a very professional and sleek appearance. Furthermore, they have a customer facing display that allows for transactions to be processed efficiently and rapidly. Some important considerations for the Clover system include: 

Platform Locked The Clover system was developed by First Data (Fiserv) and so it will only work on the First Data platform. The good news is that most processors use the First Data platform. This means that you are free to use any processor you want that supports First Data. While this isn’t the most ideal situation possible when choosing a point of sale system, it is far from the worst. Chances are pretty good that no matter who you decided to process payments with, they would be on First Data anyway.

The Clover system can only be programmed by the processor that you purchase the system from. That means that if you want to switch to another processor you will have to get another Clover system that the new processor provides. In this regard, the Clover is a lot like a standard credit card terminal.

Low Fees-   Since Clover can be used with almost any processor that means there is a lot of competition. Competition drives down prices. We label this as Low Fees because Clover is the preferred point of sale system that we give to our merchants and Synapse’s fees are the lowest in the industry.  It is possible for you to pay high rates at other processors while using the Clover POS system but it is not a guarantee the way it is with systems like Toast. Fiserv does charge a monthly fee for using the POS system and it depends heavily on the type of equipment you use. Currently, the cost of using one register is $44.95 per month.

The Clover System is the most cost-effective POS system that does not require processing agreements that are inescapable without paying large cancellation fees. Pricing is completely negotiable and there are a wide variety of processors to choose from.

No Contract- While the Clover system itself does not require a contract, it is possible that the processor you decide to work with do. Since the Clover system can be used with any processor that works with First Data, it is important to inquire about contract terms, if there are any, with the processor you choose. At Synapse, we do not contractually obligate any of our clients to work with us for any period of time.

Great Features- The Clover system comes with everything you need to run a successful business. It has a very sleek and professional design and it makes it very easy to handle a lot of customers quickly and efficiently.

Clover also has an application marketplace that allows you to download apps that you may want to utilize. For example, there are Analytics Tools, Payroll Tracking Apps, Time Clock apps for employee tracking, and even industry specific applications such as FlexWash made for car washes and Clover Dining made for Restaurants.

See Here


Clover is our pick for the best POS system because you can choose your own merchant processor, you can customize the system to do exactly what you need, there is higher competition between merchant processors which produces low processing fees, and there are no long-term contracts (unless your specific processor requires one).

Still have questions? Get in touch! We compare point-of-sale systems every day, and we’re happy to help you choose the best one for your business.

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