So you’re shopping for a merchant account and every provider wants you to sign a contract right?

That’s pretty typical, and so I would like to share with you some of the “fine print” of a contract. When shopping for a merchant account, I suggest that you ask for all the details of the contract. It is very typical for merchant processing companies to require a 36 month agreement. Usually contracts exist to guarantee your rates and fees for the duration of your contract. Make sure you know whether or not you are signing a contract, and not to assume that it is a month to month agreement.

Questions to ask:

How long is the contract?

Is the contract term negotiable? (i.e. do they offer a year contract or month to month?)

What is the cancellation fee if they are not willing to adjust the contract term?

By the way, I mentioned rates being guaranteed in the paragraph above, but the rates are never guaranteed. It’s very important to know and remember that rates will always be subject to change because Visa and Mastercard adjust interchange rates twice per year. It’s kind of like the Federal Reserve adjusting the prime rates for the mortgage industry. This language is spelled out in the fine print of EVERY merchant services provider contract no matter what the account rep says about “guaranteed rates.”

Contract Cancellation Fee:

All too often, I hear from business owners who are unhappy with their service and would like to switch providers. This is a simple thing to do, except that most of the time, there is a cancellation fee required and it usually ranges from $195 to $500 so make sure that you know what this is up front, so that you can plan accordingly. This fee should be negotiable and there are certain cases where you can get out of paying a cancellation fee like when you sell the business, for example.

Contract Term:

If you do find out that it is a 36 month agreement, it never hurts to ask if you can make a modification to sign a month to month contract. There are plenty of companies out there that will be willing to sign a month to month contract with their clients. With that being said, I have seen business owners enter into a month to month contract only to find out that their rates had gone up in the beginning of the 2nd month! I will cover rates in a different article, so for now, just remember that there are some drawbacks to a short term contract.

In summary, make sure that you get the contract terms in writing. Know the terms that you agreed to, and request a copy (or make a copy) of everything that you sign. Consider the scenarios where you would require the credit card account to be canceled and construct your contract terms to fit the needs and requirements of your business. If you follow these suggestions, I believe that you will eliminate the possibility of getting “pinched” later on down the road.

Brian Manning has been in the Merchant Services industry for over 8 years. He has been serving the Indianapolis community as well as nationwide clients with all types of payment processing needs. You can check out his latest industry updates on BancardSales and read his client Testimonials along with other industry leading updates about credit card processing.