How to cancel an unfair credit card processing agreement

Without sugar coating it, if you are stuck in an unfair processing agreement then you are likely in a tough spot. Every merchant account provider has different terms and conditions which make up their processing agreement with your business. For that reason, I can’t speak to the Payment Gateway specifics of your agreement. (Although I am happy to speak to you about the specifics of your situation.) Fortunately, even without getting into the nitty gritty of your unique situation, there are some helpful things in common that every business owner can use to their advantage.

Before we begin for a general disclosure: I am not a lawyer and nothing in this article is intended as legal advice. It’s just general feedback that I hope proves helpful in your situation.

We should start by stating that “unfair” is a subjective term. In this discussion, we are going to concentrate on the two most frequent and damaging complaints that people have: high rates (being charged more than you expected), and being locked into a contract term that you didn’t expect.

The situation I dread seeing the most is when a good honest business owner is taken advantage of by an unscrupulous credit card processor. What I am talking about is bait and switch pricing. Bait and switch pricing occurs when a credit card processor offers tremendously appealing rate… that the merchant never ends up actually paying. Instead, they are charged a much higher discount rate than they were expecting. This all stems from a pricing model in the credit card processor¬†called qualified and non-qualified pricing. There is nothing inherently wrong with that pricing model, but it is extremely confusing and can be abused by some processors to advertise a misleadingly low rate and actually apply a higher one to the merchant. I have an entire article dedicated solely to the topic of interchange and credit card pricing which is strongly recommended reading if you are not already knowledgeable on the topic.

Rates aside, the other most common complaint in relation to cancelling a credit card processing agreement is when a merchant is locked into a contract term without having known (or been notified) that there was a contract term attached to the agreement. In these cases it’s usually occurred because the business owner didn’t read the agreement at all. I do not say that in defense of the credit card processor, because the merchant should have been made aware. However, it’s also a sign that the merchant didn’t read the agreement before proceeding, which is something I critically implore all business owners to do before working with a new credit card processor. At Merchant Accounts we give our clients a choice. The agreement is monthly by default, and for larger / more established businesses that want to enter into a longer term we offer a lower rate. There are other situations as well in which a longer term is desirable. Although it’s beyond the scope of this discussion to get into it in detail, we can generalize that banks like long term clients and often reward with better rates and terms of approval as a result. In general, we leave it to the client to decide what they want. There is absolutely nothing wrong with having a 2, 3 or even a 5 year processing agreement so long as the contract was entered into it knowingly it was fair to both parties. For example, if you are processing millions of dollars per month and your processor offered to reduce your rate by 0.10% because you committed long term, then this is a win-win for everyone. However, if you operate a young business that got unexpectedly wrapped up in a long contract term with big monthly fees then it is definitely a problem.

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