Merchant Myths about Contracts
It’s not uncommon for a business owner to believe that being in a contract precludes them from changing providers. This is one of the most common merchant myths and often freezes the decision making process. While “contract” typically refer to the merchant processing agreement, the merchant myths have grown to often include equipment lease agreements. So, let’s address the two primary contract types and their misconceptions.
Merchant Processing Agreement
This agreement typically comes with a standard 3-year term and typically includes a financial penalty for early cancellation of $199-$499 on average. In recent years there are merchant contracts with large cancellation penalties that are related to the profitability of the account and the fee is a multiple of that profitability. These cancellation fees can sometimes get into the thousands of dollars, but the higher the fee the more your current provider is making from you. So, if you are not receiving outstanding service in exchange for those higher fees be wary.
(If your agreement includes “liquidated damages,” you want to proceed with caution before cancelling your agreement. )
Equipment Leasing Agreement
The other form of contract that often gets mingled incorrectly is the equipment lease. Aside from a rare point of sale lease, new equipment with the most up to date software can move along with you. The equipment lease does not tie you into a specific processor by its nature. Some merchant processors such as AMP do offer guarantees and additional warranties if you are processing with them, but most do not.
There are a variety of situations that warrant either the processor that you are switching to, or you as the business owner absorbing the cost of the current contract. As a general rule your new processor should make the switch over process as painless as possible. Ask about the options to help you with your existing contract.
Any processor that can provide you with an across the board answer about your situation without talking to you is not one to listen to. I highly recommend you meet with a representative to determine what opportunities are available to your business and whether it warrants a change. Our local representatives are always available to do a personalized qualification.
No matter what your decision or who you are looking at doing business with, don’t think about a contract as insurmountable or as a deal breaker.