Merchant Account Early Termination Fee (ETF) Explained:
An Early Termination Fee (ETF) or Early Cancellation Fee is charged by service providers when a business owner decides to close this account before the end of an agreed-upon contract term. These fees are put in place by providers to recoup the anticipated revenue lost due to the premature ending of the contract, serving as a financial penalty intended to dissuade businesses from terminating agreements early.
It is Important For Business Owners to Understand EFTs
Early Termination Fees (ETFs) are not merely penalties; they represent a financial consideration for any business owner using a merchant account. The imposition of these fees can affect a company's financial flexibility and operational decisions, such as choosing service providers or altering business strategies. Awareness of ETFs enables business owners to better forecast expenses and manage budgets, thereby avoiding unexpected financial burdens that could impede growth or operational efficiency. Moreover, understanding these fees can assist in more informed negotiations with service providers, potentially leading to more favorable contractual terms that align with the business’s financial planning and stability.
What Triggers EFTs?
Early Termination Fees (ETFs) are typically triggered by several actions that business owners might undertake, often inadvertently. One of the most common causes is the cancellation of a merchant account agreement before its scheduled end date. Other triggers may include switching to a different payment processing provider, which can often be seen as a breach of the initial agreement, or failing to meet stipulated minimum processing requirements that are commonly outlined in the contract terms. These triggers are enforced to ensure that the provider recoups a portion of the projected revenue that was expected over the term of the agreement, compensating for the disruption and administrative overhead caused by early contract termination.
Ben Calderoni
I am presently using Authorize Net and go through Comerica Bank. My ETF charges are very high.. Always leave about a $20,000 balance at the Bank.