Short answer
Switching is worth it when the total saving over the time you will stay is larger than the one-off costs of moving. Divide the exit, set-up and hardware costs by the monthly saving to get the payback period in months. If you will stay longer than that, and the saving holds in a quiet month, it pays off.
Part of Contracts and switching. Start with the main guide: How to cancel a card machine contract without getting caught out
Key takeaways
- Payback months = one-off switching costs ÷ monthly saving.
- One-off costs include the exit fee, set-up fees, new hardware and any overlap of old and new fees.
- A saving that looks big on paper can vanish if the exit fee is large or the new contract is long.
- Test the saving on your quietest month, not just the average.
- If the term on your current contract is nearly over, waiting can beat switching now.
A quote that promises a lower bill is not an instruction to switch. The saving arrives monthly. The cost of getting it arrives up front. Whether the trade is a good one depends on how long you will stay and how big the one-off costs are.
The good news is that the calculation is simple. It needs four numbers and a few minutes. This guide shows you how to do it, works through two examples (one where switching clearly pays, one where it does not), and gives you a list of the things the simple maths leaves out.
Which four numbers decide if switching pays?
You need:
- Your current monthly cost, with every charge included.
- The new monthly cost, from a quote written against your own statement.
- The one-off costs of switching, including any exit fee, set-up fee and new hardware.
- How long you expect to stay with the new provider.
Getting the first two right is where most mistakes occur. Use the all-in cost for both, including terminals, gateways, PCI and minimum charges. Our guide to the effective rate and the bill check will make sure you have the full picture of your current cost.
How do you calculate the payback month?
One-off costs to include
- Exit fee on the old processing contract
- Terminal charges: remaining rental, return fee or lease settlement
- Set-up or activation fee on the new account
- New hardware, if you cannot reuse the old terminal
- Overlap costs, if you pay both providers for a few weeks
- Your time, if you want to put a value on it
Leave nothing out. A single forgotten charge can move the payback by months.
Example 1: switching pays
A business pays £245.00 a month in total card costs. A quote shows £185.00 for the same month on the same turnover. The one-off costs are an exit fee of £300.00, a terminal return charge of £100.00 and £50.00 of overlap fees: £450.00 in total.
- Monthly saving: £245.00 − £185.00 = £60.00
- Payback: £450.00 ÷ £60.00 = 7.5 months
- Net gain after 12 months: £60.00 × 12 − £450.00 = £270.00
- Net gain after 24 months: £60.00 × 24 − £450.00 = £990.00
- Net gain or loss
View the data as a table
| Net gain or loss | |
|---|---|
| Month 0 | −£450 |
| Month 6 | −£90 |
| Month 12 | £270 |
| Month 18 | £630 |
| Month 24 | £990 |
The business starts £450.00 down and breaks even in month 8. Illustrative.
If this business expects to stay on the new provider for at least two years, switching is clearly worth it. Even if it only stays for a year, it comes out ahead. Only if it stays for fewer than eight months would the move lose money.
Example 2: switching does not pay
A different business pays £150.00 a month. A quote offers £135.00. The one-off costs are £600.00, mostly an exit fee because the contract has 20 months left.
- Monthly saving: £15.00
- Payback: £600.00 ÷ £15.00 = 40 months
- Net gain after 24 months: £15.00 × 24 − £600.00 = −£240.00
Switching now loses £240.00 over two years. But there is a better option: wait. With 20 months left, staying costs no exit fee. If the business waits until the term ends and then switches, it pays no exit fee and starts saving £15.00 a month with no payback period.
Same two options. Illustrative. Waiting means staying to the end of the term, then switching with no exit fee.
By waiting 20 months and then switching, the business gets four months of saving (£15.00 × 4 = £60.00) and no exit cost. The best time to switch is often the end of the term.
When does the maths say yes, and when does it say wait?
Use these rules as a starting point.
| Payback period | What it usually means |
|---|---|
| Under 6 months | Switch, unless the new contract has hidden drawbacks |
| 6 to 12 months | Switch if you expect to stay at least two years |
| 12 to 24 months | Think carefully. Check whether waiting for the end of the term is cheaper |
| Over 24 months | Probably wait, unless there is another reason to move |
These are guidelines. A business that plans to close or sell in a year should use a shorter horizon. A business that expects to grow should check how the saving changes at higher turnover. See flat rate versus interchange plus break-even.
What does the simple calculation leave out?
The payback formula assumes a fixed monthly saving. In practice, several things can move it.
- Seasonality. If turnover swings through the year, test the saving in the quietest month. A fixed fee can wipe out a saving when sales are low, and a minimum monthly charge can do the same.
- Card mix. A quote built for one card mix may not hold if your mix changes. See debit, credit and commercial card fees.
- Price increases. Some contracts allow rate rises after an introductory period. Check the terms for the whole contract, not just the first few months.
- Contract length. A saving that comes with a three-year term is worth less than the same saving on a rolling agreement, because you carry exit risk again.
- Service. Faster settlement, better support and more reliable hardware have value that the monthly figures do not capture.
- Growth. If turnover grows, the best offer may change. Test the quote at a higher turnover as well.
A worked example with a bad month
A business averages £12,000 of monthly card turnover but drops to £3,000 in its quiet month. The current provider is a flat rate of 1.6% with no fixed fees. The quote is 1.0% plus a monthly fee of £35.00.
| Month | Turnover | Current (1.6%) | New (1.0% + £35.00) | Saving |
|---|---|---|---|---|
| Average | £12,000 | £192.00 | £155.00 | £37.00 |
| Quiet | £3,000 | £48.00 | £65.00 | −£17.00 |
In an average month the business saves £37.00. In the quiet month it loses £17.00. Over a year, if it has four quiet months and eight average ones, the net saving is 8 × £37.00 − 4 × £17.00 = £296.00 − £68.00 = £228.00, which is still positive, but a lot less than £37.00 × 12 = £444.00. Taking the average alone would have shown a saving almost twice the real one.
Same business, same quote. The fixed fee turns a saving into a loss in the quiet month.
What should you check before you decide?
- [ ] I know my current all-in monthly cost, including terminals and separate invoices.
- [ ] I have a written quote against my own statement.
- [ ] I have the exit cost in writing and the date it applies.
- [ ] I have added set-up, hardware and overlap costs.
- [ ] I have calculated the payback period.
- [ ] I have tested the saving in my quietest month.
- [ ] I have checked the new contract length and exit cost.
- [ ] I have checked whether waiting until the end of the term would be cheaper.
For consultants
Always show the payback period alongside the saving. A merchant who sees "£60.00 a month" will ask what it costs to get it. Giving them the answer first builds trust, and a merchant who understands the numbers is less likely to feel misled later. Offer to show the "wait" option too if it is better. The checkmyrates calculator has a field for the exit cost and shows savings over one to ten years, so the quote reflects the real position.
Frequently asked questions
How do I know if switching card provider will save money?
Compare your all-in monthly cost with a written quote on the same turnover. Subtract the one-off switching costs to find the payback period, and check the result against a quiet month.
What are the costs of switching?
The exit fee on the old contract, terminal return or lease charges, any set-up fee, new hardware if needed and any overlap period when you pay both providers.
How long should the payback period be?
Under six months is usually an easy yes. Between six and twelve months it depends on how long you will stay. Over two years, waiting for the end of the term is usually better.
Should I wait until my contract ends?
If the end is close, often yes. Waiting avoids the exit fee, and you start saving from the first month after the switch.
Does seasonality change the answer?
Yes. Fixed monthly fees and minimum charges can turn a saving into a cost in a quiet month. Test the offer on your lowest-turnover month.
What if the new provider offers to cover my exit fee?
Check the terms. A contribution is only a gift if it is not repaid through a higher rate, a longer contract or a clawback. Compare the whole deal.
Sources and further reading
Figures in this guide are examples to show the method. Fees, rules and rates change, so check your own statement, contract and current rules before you decide. This is general information, not financial or legal advice.