More and more businesses get card processing the same way they get their scheduling, ordering or point-of-sale software: from the software company. You sign up for the software, and payments come built in. Sometimes the software is cheap or even free.
That arrangement can be convenient. It can also mean the real price of your software isn't on the software invoice. It's inside your processing rate, a small slice of every sale, for as long as you use the system.
This guide explains how that works, how to tell from your own statement what you're paying for, and the questions to ask before you sign or renew.
Key takeaways
- Software companies that offer built-in payments earn a share of every card sale you take. For some, it's worth more than the subscription.
- That share is paid for through your processing rate. Cheap or free software often comes with a flat rate that's higher than what you'd pay elsewhere.
- Watch for terms that keep you from shopping the rate: required in-house processing, extra fees for using an outside processor, hardware that only works with one processor, inactivity fees, and long terms with termination fees that grow with every terminal.
- Look at a full year of statements. Annual fees bill once and never show in a typical month's rate.
- To see what the software really costs, compare your total processing cost with a competitive quote for the same sales. The difference, plus the subscription, is the true price of the software.
- Bundled can still be the right choice. The point is to choose it knowing the price.
Why software companies want your payments
When you take a card payment, the fee is split. Most of it goes to the bank that issued the card and to the card network. Those charges are set by Visa and Mastercard. The rest goes to whoever provides your processing: a markup for their service.
A software company that offers built-in payments takes part of that markup. Depending on the arrangement, it either gets a revenue share from a processing partner or acts as the processor itself, signing you up under its own master account. That second setup is called a payment facilitator, or payfac.
The money is significant. A 2020 analysis by the venture firm Andreessen Horowitz estimated that adding payments and other financial services can raise a software company's revenue per customer by two to five times, and that payfacs can capture 0.75% to 1% of the card volume they process. One payment provider's guide for software companies puts what software companies typically earn at 0.2% to 0.6% of every transaction.
None of this is improper. Software companies have to make money, and building payments into the product can make things simpler for you. But it changes the question you should ask. It's no longer "what does the software cost?" It's "what do the software and the payments cost together?"
How the processing pays for the software
1. A flat rate with no detail
Built-in payments are usually priced at one flat rate, such as a percentage plus a few cents per sale, whatever card the customer uses. That's simple to understand. It also hides the spread.
The card networks charge very different amounts for different cards. A debit card costs far less to accept than a premium rewards credit card. Under a flat rate, you pay the same for both, and the difference stays with the provider. When the networks lower their rates, a flat-rate merchant usually sees nothing. (We covered that in our post on the Visa–Mastercard settlement.)
2. Processing you're required to use
Many software agreements require you to use the company's own payments. One POS company's contract guide quotes a typical clause: "Customer shall use Vendor's integrated Payment Processing Services." If the processing rate rises later, your only way out may be to replace the software as well.
3. A fee for using someone else
Some platforms let you bring your own processor but charge for it. One of the largest e-commerce platforms adds 0.2% to 2% of every sale, depending on your plan, when you use an outside payment provider. That's on top of whatever the outside processor charges. The penalty can wipe out the saving from a better rate.
4. Hardware that only works with one processor
Card terminals encrypt card data with keys that tie them to a processor. Many can't be moved to another one, so switching usually means new hardware. If the terminals are leased, the lease payments may continue after you stop using them.
5. Contract terms that make leaving expensive
The same contract guide lists terms worth finding before you sign:
- initial terms of three years or more, with automatic renewal unless you give notice in a narrow window;
- early termination fees equal to the remaining subscription payments;
- clauses allowing annual price increases, sometimes up to 10%, on short notice;
- fees to export your own data, such as customer records, menus and sales history, when you leave.
Agreements for one widely used restaurant system, as reviewers described them this fall, show how these terms work together:
- A termination fee that grows with your setup. A monthly amount set by your sales volume, from $100 to $750, times the number of terminals, times the months left. Two terminals at the $300 level with two years left comes to $14,400.
- A floor on price increases. Prices rise each year by inflation plus 1%, with a minimum of 4% on the software agreement and 7% on processing.
- An inactivity fee. $75 per terminal for each 30 days without processing through the provider. Keeping the software and processing somewhere else isn't a real option.
- A long notice period. After the 36-month term, the agreement renews for 12 months at a time unless you give 90 days' written notice.
Your own agreement may differ, and the signed version is the one that counts. But if you see terms like these, price the exit before you sign, not when you want to leave.
Gift card and loyalty balances are a quieter version of the same problem. They're owed to your customers, and moving them to a new system can be hard once you've left.
6. Fees that show up once a year
Annual program, compliance or "service and maintenance" fees are billed once a year, so they never show in a typical month. They can be large. In 2026, merchants on one restaurant system reported a new combined annual fee of around $2,000 per account, replacing two per-device fees of $250 and $325. On $40,000 a month in card sales, $2,000 a year adds about 0.4% to your effective rate.
Do the math: what the software really costs
Here is a simple way to price the software honestly. The numbers below are hypothetical, chosen only to show the method.
Say a business takes $40,000 a month in card sales across 1,000 transactions. Its software costs $69 a month, with built-in payments at 2.6% plus 15¢ per sale.
| Line | Bundled software and payments | Same sales, competitive interchange-plus quote |
|---|---|---|
| Card network cost (say 1.9% for this business's mix) | $760 (inside the flat rate) | $760 (passed through at cost) |
| Processor's charges | $430 (the rest of the flat rate) | $180 (0.25% plus 8¢ per sale) |
| Total processing | $1,190 (2.6% × $40,000 + 15¢ × 1,000) | $940 |
| Software subscription | $69 | $69, or whatever the software costs without payments |
In this example the bundled processing costs $250 a month more. So the "$69" software really costs about $319 a month, or roughly $3,800 a year. That might still be a good deal if the integration saves enough time. But it's the number to compare when you shop for software.
Then add what the monthly statement doesn't show. If the bundle also bills a $2,000 annual fee, that's another $167 a month, and the "$69" software is closer to $486 a month. And price the exit: under a termination formula like the one described above, two terminals at the $300 level with 30 months left would cost $18,000 to leave.
Your own figures will differ. The network cost depends on your card mix, and whether you can use an outside processor depends on your contract. The method holds either way: total processing cost under the bundle, minus total cost under a competitive quote, plus the subscription.
How to tell from your statement
Statements from built-in payment providers tend to look different from a traditional merchant statement. These are the signs that the processing is priced as a bundle:
- One rate for every card. Debit, rewards credit and business cards all cost the same percentage.
- No interchange or card-network lines. You see "processing fees" but nothing from Visa, Mastercard or the issuing banks.
- Deposits arrive with fees already taken out. The statement shows net deposits, so the total you paid isn't printed anywhere.
- Software and processing on one invoice. Subscription, hardware and processing charges are mixed together.
- Charges that appear once a year. One month's statement can't show them. Look at all twelve.
- An effective rate that doesn't move. Total fees divided by card sales comes out nearly the same every month, whatever cards your customers used.
None of these means you're overpaying. They mean the statement can't tell you, and you'll have to work out the split yourself, or have someone do it.
Questions to ask before you sign or renew
- Can I use my own payment processor with this software? If so, is there an extra fee?
- Is processing priced at a flat rate or interchange-plus? Can I see the card-network cost on my statement?
- If the processing rate goes up, can I leave without a penalty?
- Will my card terminals work with another processor? Are they owned, rented or leased?
- How long is the term? How and when do I give notice so it doesn't auto-renew?
- What does it cost to leave early? Ask for a worked example with your number of terminals and months remaining.
- Is there an annual fee? Is it charged per device, per location or per account, and can it change?
- Is there a fee if I keep the software but stop processing with you?
- How much can prices rise each year? Is there a minimum increase?
- Can I export my customer data, sales history, and gift card and loyalty balances at any time, at no charge?
Get the answers in writing, preferably in the agreement itself.
When bundled makes sense
Built-in payments have real advantages: one company to call, reporting that matches your sales records, faster setup, and features that only work with integrated processing, such as tips, table-side payment or saved cards for repeat customers. For a small business with modest card volume, a simple flat rate may cost less than the time it takes to manage a separate processor.
The trade-off grows with your volume. At $40,000 a month, a 0.6% difference in processing is about $240 a month. At $200,000, it's about $1,200. The bigger your card sales, the more it's worth knowing what the bundle costs.
For agents: when the software brings its own payments
If you place processing, you've probably lost a merchant this way. The business picks new software, the software comes with payments, and the processing leaves with it, along with your residual. A few habits help:
- Know what software each merchant runs. Ask at every review. A software purchase or renewal is when the processing is most likely to move.
- Know which systems let merchants bring their own processor, on what terms, and which ones the processors you represent integrate with.
- Bring the math, not a rate pitch. Use the method above: total cost under the bundle, total cost under your quote, plus the subscription. A merchant who sees the real price of "free" software can decide on numbers rather than a sales conversation.
- Read the contract before you quote. Required-processing clauses, outside-processor fees, locked terminals and termination fees decide what's possible. Ask the provider for its termination calculation in writing. Don't promise a move the agreement won't allow.
- Be honest when the bundle wins. If the integration is worth it, or leaving costs more than it saves, say so. That merchant will remember who told them the truth when the contract comes up for renewal.
- Get involved before the software is chosen. The questions in the list above protect the merchant and keep the processing decision open.
Get an independent read
Statement Forensics audits processing statements and shows, in plain English, which dollars go to the card networks and which go to your provider. On a bundled statement, that's the split the statement itself won't show you. Visa and Mastercard charges are compared with the networks' published schedules, and every figure is checked against the statement's own printed totals.
We don't sell processing or software, have no processor, ISO or platform affiliation, and take no residuals or referral fees, so nothing in the report is steering you anywhere. Agents can send a merchant's statement too, with the merchant's permission, and get the same neutral report to go through with them. See the brief for agents. Statements sent for an audit are used to produce the reports and deleted when they're delivered. US statements only.
Email a recent statement to audit@statementforensics.com.
Frequently asked questions
Is free POS software really free?
Usually not. When the software is free or very cheap, the provider typically earns through your processing rate instead. That can still be a fair deal. To find out, compare your total processing cost with a competitive quote for the same sales.
Can I use my own processor with my software?
It depends on the software and your agreement. Some systems require their own payments. Some allow an outside processor but charge an extra fee per sale. Some work with several processors at no extra cost. Check the agreement, and ask whether your card terminals would work with another processor.
How do I know how much of my processing rate pays for the software?
Work out what the card networks charge for your mix of cards, then compare it with what you pay. On a flat-rate statement that usually takes an independent review, because the network cost isn't printed. The difference between your cost and a competitive interchange-plus quote is roughly what the software costs you through processing.
Why did a large fee come out in one month?
It's often an annual fee: a program, compliance or "service and maintenance" charge billed once a year, sometimes per device. Check your agreement for how it's calculated, and dispute it in writing within the window your agreement allows if it doesn't match.
What is a payment facilitator?
A payment facilitator, or payfac, signs businesses up for card processing under its own master merchant account, instead of each business getting its own account with a processor. Many software companies with built-in payments work this way. It makes setup fast, and it usually comes with flat-rate pricing.
Should I switch software to get a better processing rate?
Not necessarily. Switching costs include new hardware, retraining, data migration and any early termination fee. Price the whole picture first: what the bundle really costs, what the alternative costs, and what it takes to move. Sometimes the better move is to negotiate the processing rate at renewal.