23 May Getting Out of Your Merchant Account Contract
Once someone is locked into a merchant account contract, it can be hard to get released from that contract and begin a new agreement with another credit card processor. Although there are plenty of credit card processing companies that sound like good deals at first, it usually does not make too much sense to sign a long term contract. While merchant accounts are vital aspects of any kind of business these days, the fact of the matter is that new types of payment gateways can pop up every day. There is no reason to lock oneself into a long term contract if a cheaper option could pop up for business owners in the near future.
Cancelling a Merchant Account Contract
When it comes to the contracts associated with merchant accounts, it can be hard to figure out whether or not breaking the contract would be a good idea. When the contract is originally signed with the credit card processing company, there is a clause in the contract that says that a flat fee must be paid if the contract is terminated. This is usually a problem for small businesses, but larger companies can simply view this kind of small fee as an expense of doing business. The only way a business owner can figure out whether or not switching merchant accounts will make sense for him or her is to take a look at the amount of transactions that are coming in on a monthly basis.
Does Breaking the Contract Make Financial Sense?
Different credit card processing contracts are going to come with different terminations clauses, so everyone should read their own contract before they start to make any kind of serious decisions. When taking a look at the cost of terminating the contract, it is important to compare it to that amount of money that would be saved by switching to another payment processor. For example, if the current processor charges a $20 monthly fee for their services and the termination fee is only a few hundred dollars, then there is a good chance that switching to the new payment provider would make sense. This is especially true if the new company does not have any kind of monthly fee attached to the contract and they also provide a lower discount rate to all business owners.