17 Oct Why You Shouldn’t Sign a Contract With Cancellation Fees
For many business owners who are looking into setting up a merchant services account for the first time, it can be difficult to decide what kind of contract to go for. For example, businesses that process a lot of credit cards will tend to want a contract that charges very little per card swipe, but it might not mind paying a percentage of each bill. A business that only processes credit cards during certain seasons (such as a farmer’s market) might balk at paying a monthly fee in months when they’re not open. Every business, however, should be very wary of signing a contract that subjects them to cancellations fees.
While it seems like every service-based business from cable to cell phones charges cancellation fees, they’re a bad idea for a business that is starting out with a new merchant services account. At first, they might not seem so bad, after all, no one expects that they will have a problem with their credit card processing when they first sign up with a company.
After working with a company for a while, however, many businesses discover that they have different credit card processing needs than they first thought. For example, a company may discover that their customers prefer to pay for small transactions in cash and larger ones with credit, meaning that they’re processing fewer transactions each month but for larger amounts than they thought they would. If they agreed to a plan that allowed for unlimited transactions but a high percentage swipe fee, they would probably do better under a plan that charged a small fee and a lower percentage per transaction. Other companies may have issues with processing or customer service with their merchant services provider.
By agreeing to cancellation fees, a small business has very few options to get out of these contracts. If the fees cost more than the savings, it can be difficult to find a way to justify switching providers. To make matters worse, many merchant services providers that charge fees do so in order to save money on customer service costs. After all, if a business can’t get out of a contract, why should the company keep up their end of the bargain?