Cancelling a Merchant Account Without Paying a Fee

23 Replies

Credit Card Processing

Part 2 of 2 – Taking Action

If you read Part-1 on how to prevent getting into a bad merchant account contract, we’re now going to cover the process of cancelling a merchant account that has an Early Termination Fee (ETF) — also sometimes also called a “Deconversion Fee.”

Getting Prepared

Before cancelling a merchant account, there are a few things you may want to do if you are expecting to be charged an ETF. First, check your last three months’ statements to see if any of your fees have been raised. Most state laws (and many contracts) say that if your fees have been raised during your service agreement, you can cancel with no penalty within a certain time frame (usually 30-90 days). If you just signed up with the provider and want to cancel because you were deceived by an agent, gather any supporting evidence that proves that you were misled about pricing or cancellation terms.

If you are going out of business, Andrew Schrage, co-owner of Money Crashers Personal Finance, notes that some contracts have conditions to waive the fee under such circumstances. Be sure to reference your agreement to find any provisions that allow you to terminate service without an ETF. Keep in mind that even if you find provisions that allow you to cancel without an ETF, it doesn’t mean that a processor will automatically waive your fee. Therefore, it is advised that you prepare for an ETF by taking the next steps before cancelling your service.

1. Close Your Attached Checking Account

When you signed up for your merchant account you likely granted the processor access to your checking account. Most often this is done so that your sales can be deposited from your merchant account to your checking account, but once a provider has ACH access they can also make withdrawals without prior notice.

Early Termination Fees are almost always automatically debited from a merchant’s attached checking account the moment they cancel service. The only way to prevent a processor from taking the fee from you is to cancel your checking account and notify the bank that you do not authorize any further transactions from it. One tactic for ensuring that the bank does not hold you liable for withdrawals after the account is closed is to inform them that you think the account number has been compromised and that you fear unauthorized withdrawals. This tactic also keeps the processor out of your account for any other surprise fees they might want to take at another later date. For instance, merchant account providers are notorious for collecting a final PCI Compliance Fee after an account has been closed, even several months after the fact. Keep in mind that you should pay any legitimate fees owed to the provider (such as remaining processing fees) because the processor has full right to them.

It’s important to note that although closing your checking account will keep a provider from electronically collecting remaining fees while you fight an ETF, the provider may threaten you with lawsuits, credit score damage, collections, and/or placing you on the Terminated Merchant File (a highly unethical tactic). It’s up to you to decide if the fight is worth the risk.

2. Collect Supporting Documentation

Gather any documentation that supports the reason that you should not be charged an ETF. This documentation could show that the processor has recently raised your fees, modified the contract, or breached the provisions of the contract.

Create a spreadsheet showing how much you have already paid the processor in fees. If you can definitively show that the processor has likely profited from your account, there should be no need for a an ETF. Alternatively, use a spreadsheet to compare fees from your last provider to your current provider. If you current provider’s costs are more expensive, but you were promised low fees, you may be able to use this information as leverage with the provider and other reporting agencies.

3. Zen and the Art of Negotiation

Lastly, prepare to be courteous. The person on the other line is a human being and is more likely to help you if you are nice and friendly. Remember, you signed a contract and the provider does not necessarily have to waive any fees that you agreed to pay in writing. If you go into the situation with a bad attitude, they will be far less likely to consent to your requests.


Methods for Fighting an Early Termination Fee

Whether you have already involuntarily paid an ETF or managed to keep the provider from taking it by closing your checking account (which the provider is fighting), the tactics below can help you ultimately win the fight for your money.

1. Get Your Agent Involved

Getting the agent who setup your account involved can solve a lot of problems. In some cases the agent actually makes the final call on whether or not the ETF should be charged. If the agent values your relationship, and has any influence in the matter, he should be able to get it waived or reimbursed. Additionally, if the agent is independently contracted and you can prove he lied about contract provisions or fees when setting up your account, you could threaten him personally with a lawsuit and even sue for damages.

2. Make a Case

Most providers require written notification of an account cancellation. If you have documentation that proves, or even suggests, that your ETF should be waived, be sure to submit copies along with your cancellation notice. Your cancellation letter should provide an explanation of why your ETF should be waived in reference to the supporting documents. If you did not expect an ETF, but had it taken anyway, this tactic can also be used to get the fee refunded.

3. Reverse the Fee

If an ETF has been debited from your checking account by surprise, get your bank involved. Many banks will reverse the charge if you report it as unauthorized. However, if the bank where you keep your checking has also provided your merchant account, this tactic may be fruitless. Once you have successfully reversed the fee, it’s probably a good idea to close the checking account.

4. Threaten Public Complaints and Official Reports

If an processor is refusing to waive or reimburse an ETF, there are a few places that you can file complaints that will get a merchant account provider’s attention. We’ve previously covered these places in another article titled “How to Report Bad Credit Card Processors” so check it out after you finish this article, but before you start filing reports be sure to speak with an upper level manager and let them know that you are about to move forward with this tactic. Be specific about where you will file complaints, as it will show them that you mean business. If they still refuse to work with you, start filing reports and you may be surprised how quickly they change their tune when a third party gets involved.

Bottom Line

Although merchant account Early Termination Fees are often imposed under ethically questionable conditions, they are perfectly legal in most cases. Your best chance of avoiding an ETF is to eliminate it prior to setting up an account. For those who are already stuck in this unfortunate situation, preparation and courteous attitude can make all the difference. In the event that a processor will not budge, filing reports and public complaints may get the job done.

Do you have a story regarding an Early Termination Fee battle? Tell us about it in the comment section!

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  1. Debbie

    I have a worldpay account and the STATE put a lien on my account which led to them cancelling my agreement — now they want $195 in cancellation and monthly feess. I contacted them several times and they never responded. I’ve asked them to waive the fees since I didn’t cancel it — waiting to hear from them. any suggestions?

  2. Cynthia Ingram

    My contract with my merchant processing company just expired ( praise God), but I have another year to go with the equipment lease contract that was tied to the processor’s agreement (Lease finance group) who quoted me $1,500 ETF. Do the same techniques work for getting out of a contract with Equipment such as state limits on eft fees , etc.?

    1. User Phillip Parker Post author

      Cynthia, I can’t guarantee that the techniques will work, but I recommend checking with your Secretary of State. If the ETF is illegal in your state you should be able to get out of it.


    Was told by a walk in salesman that he would save me money and there would not be any interchange fees.
    Yes I did sign some paperwork which he faxed after he was going back and forth getting rates with someone on the phone. In the end I have not received a copy of any type of contract? I am being charged 220.00 per month rental fee for 4 years. So with this fee I am not saving any money. I tried to contact this company thru email and phone right after I felt I was taken for a ride.Less than a week. All I get is a run around,there is no one to communicate with. Even the BBB did not get any response from this company. So I cannot even try to get out of this one.
    I am just a small business owner that likes people and trusted this salesman to save me some money He did leave his phone number which I called. He stated he quit this job,but would call his old boss to help me out.It never happened.
    I have not given up,and will get out of this. In the end I think it might be best to stick with your business bank even if it cost a little bit more money.

  4. Stacey Jaudon

    Hi. I was diagnosed with two forms of cancer in December 2013 and was out of work for months. Having a solo private practice meant no income and no business done through Worldpay since I was not seeing clients. After having a second surgery, it became clear to me that I wanted/needed to close my practice so I called a rep with Worldpay asking to close my account of over three years. I was told that I needed to have notified them during a renewal period which was already passed, and would either need to wait until next years renewal window or pay $500 for early termination. My contract had nothing about renewal periods or ETF–what it had was one tiny printed line saying I agreed to basically anything Worldpay required/or instituted without them informing me. Gee whiz I feel stupid, taken advantage of, and really angry. I even explained that I had been diagnosed with a deadly cancer which after all treatment left me unable to continue to practice. I got nothing from the rep but those two options–plus the renewal time window has weird requirements around the dates making the whole process such an ugly quagmire!

  5. Kevin Cram

    I cancelled my service with Anovia because Elavon had lower fees. i was told to remember there is a $495 ETF. I had never been told about the fee and asked if it could be waived. The response I received was”Unfortunately, due to the cost of acquisition we incur when opening an account we are not able to waive the $495.00 Early Termination fee.”
    What does it really cost a processing company to open an account and am I being told the truth? Any information would help.

    1. User Phillip Parker Post author

      Hi Kevin,

      The cost of “acquisition” is almost always the commission that is paid to the agent or company that sent you up with the account. Typical commissions range from $200 – $1500, with the average being around $300.

  6. Jake W


    I had/have a small ownership in an online business that did not work out due to high rates of fraud with many customer charge backs. The last purchase on our website was made in March. My partner has the majority stake in company and therefore dealt with all financial aspects of the business. I assume he closed the merchant account sometime in March or April. He is now telling me the merchant can hold us liable for customer charge backs up to a year after they make their purchase. Could this be true? In the meantime my investment into the company is being held hostage and I’m getting little information from him.

    1. User Phillip Parker Post author

      Hi Jake,

      Generally, the chargeback time limit with Visa and MasterCard is 180 days while American Express has been known to allow chargebacks of 12 to 18 months. Each state has different laws regarding chargeback time limits and it can also vary by the bank that issued the customer’s credit card. Since you had an online business and were likely taking payments from all over the country, the rules get even more complicated. It would be wise to plan to deal with potential chargebacks for at least a year.

  7. Kel

    I work for a highly ethical direct processor and do all my homework BEFORE transitioning a new merchant onto our platform as I do not like surprises. In this case, I was extra careful as the owner of this particular business is a friend of mine and has sent a lot of business my way. The old merchant account was written under Bank of America. They told my merchant ‘NO EARLY TERMINATION FEES’ and they also confirmed the terminals were not leased. The day after canceling the Bank of American merchant account this business was hit with nearly an $11,000 ETF based on ‘LOSS OF PROFITS OVER REMAINDER OF AGREEMENT’.

    This company has banked with them for literally over 30 years. AFTER Bank of America hit them with this outrageous early termination fee, they had the nerve to call and say they would reverse the fee if the business came back. The owner was outraged, just on sheer principle they will not go back. I cannot absorb the fee charged. They even hired an attorney to see if there were any ‘holes’ they could find in order to recoup the lost funds. The attorney said they had about a 30% chance of getting any money back and the business owner pulled the plug on fighting this, spent another $3,000 on the attorney.

    I feel guilty, had I known they would be charged I would’ve recommended they wait out the agreement. I’m at my wits end with coming up with any new ideas to recoup some of this money. The owner asked that I pay $5,000. I pleaded with our company but they do not pay ‘termination fees’. And this one is simply ridiculous, doesn’t even seem legal.

    Any ideas for me here??

  8. Bryan

    We’re nearing the end of our merchant agreement with Electronic Merchant Services. The fine print of our agreement says that written notice must be presented 90 days before the end of the contract term in order to terminate the 24 month agreement and avoid automatic renewal for consecutive 18 month terms. We had submitted the application on 8-15-2012 and our agent got back to us and completed the lease agreement on 9-26-2012. He wrote on the agreement that the commencement date was 9-26. We submitted the written notice on 6-9-2014, which we interpreted as being before the 90 day deadline. Our retention agent informed us that they interpret the commencement date to be the same as the application date and that his copy of the agreement does not have a commencement date written-in. That would be true because the agent wrote in that information 7 weeks after he had torn the triplicate forms apart. I realized that we would have a difficult time winning this argument as I believe that the misdirection was intended to produce just this result. Having accepted that we will need to suffer though another 18 months of poor service and high fees, I instructed him to submit our termination letter now for the end of the renewal term. He said that he could not accept the termination letter now and that we should send it in the fist week of May 2016. If you have been keeping a time line, you will see that the actual deadline date for the termination letter for the fist renewal period would 11-15-2015. He instructed us to submit it 6 months too late. After several phone conversations and emails he is sticking to that date, even after I reminded him that the automatic renewal term is for 18 months and not 24. I believe that this is a tactic to get us to miss the deadline again at the end of the fist renewal period. I really feel like EMS is purposefully giving us wrong dates to confuse us and make it difficult to terminate the agreement. Is there anything we can do?

  9. Roberta York

    I signed a contract and about 1 1/2 weeks later, changed my mind. I didn’t use the equipment or even take it out of the box. Wells Fargo has said there’s nothing they can do and I’ll have to pay the early cancellation fee. Is this true? And will I still have to buy the equipment?

    1. User Phillip Parker Post author

      Hi Roberta,

      Unfortunately, it can be very difficult to get out of these commitments as they are part of the contract that you signed. However, it is very common for sales agent to fail in disclosing such terms verbally hoping that you will miss them in the fine print. I would suggest reading the following article for tip on getting out of such a predicaments: Cancelling a Merchant Account Without Paying a Fee

  10. Val

    I wish I had read this before. I am having to go through this with Future Payment Technologies. The rep lied about what would happen if I wasn’t happy with their company, no mention of EFT at all. The rep came on a busy, hectic day and had an iPad and I tried to read the contract but somehow missed the EFT. Grrr. Now I am stuck with their outrageous charges each month and I sent the card machine back. I haven’t even been been able to access my account online since day one, they keep saying they sent me an access code via email…nope. I need to see my account so I can proof that they are not the lowest fees. This hopefully will get me out of my contract as well as my partner.

  11. Kim

    I have to say I wish I would have read this article earlier. We are a gun store and due to some unfortunate events, our sales sky rocketed and Payment Alliance started withholding funds. We then rushed into several other contracts set up by a third party who ultimately lied/ and still is … we are now dealing with Meritus and Global Payments and we did sign the contracts in haste – believing our agent and trusting him. We never ever used Meritus – don’t have an account set up even if we wanted to use them, don’t even have the account number to call them about – but now they want close to $700 bucks to close the account and we never processed one single sale through them as I DON’T HAVE AN ACCOUNT TO PROCESS THROUGH. I have no such numbers and no such terminal to connect too. We notified our agent within 30 days to say we were with Chase and to close the Meritus account and he now claims we never did this, he also said he would cover the original $43 in fees .. which again he is saying he never said. I’m not making this up … but now I want to get out of Meritus and am having a hard time and I don’t think it is fair to pay the $700 for a service I never ever used or even received. I don’t have an account number for peet’s sake!!! It is dirty dirty dirty and they should be ashamed of themselves!! At the end of the day, I would stay away from BOTH companies …. we actually are going through Chase and it has not been a problem at all. And I’m cancelling my bank account that PAI has access to but I just need to know how much they are holding before I do so cause I certainly don’t want them to steal the money. A business owner should never have to go through this … high way robbery in a white collar …. just absolutely pathetic!!! Sad to see the employees though that work for these companies and the agents that represent them almost driving a business under … what satisfaction do they get … oh wait they get a paycheck … what has humanity come too??

  12. Dwayne

    Now that I have closed my bank account to prevent Summit Merchant and LFG from helping there self to my money I have many calls with demands for payment, along with letter demanding payment or sueing me. I never signed a contract, once this all started I dug out paper work that was sent to me by summit after there rep installed equipment. I was told I didn’t have to sign contract, once I looked at paper work my name had been forged. How do I prevent Summit from hurting my credit report?

    1. Phillip

      Hi Dwayne,

      If your signature was forged on an application, you should file a fraud report with your local police station. If your application included a “personal guarantee” and they have your social security number, they have all they tools they need to use your credit as leverage against you. The best course of action would be to get law enforcement involved if someone fraudulently forged your signature and to supply your police reports to the credit agencies if Summit files a claim against you.

  13. Manju

    I have an appointment with the agent and am preparing for the meeting.
    1. Initial Agreement maybe outdated or a wrong version of the agreement was presented at the time of application. The actual agreement could be a more recent date. Signed 7-13-12
    2. Amendment to the agreement is dated 2006 which do not cross-reference any of the sections on the initial agreement. This document has grammatical, redundant mistakes causing confusion. There is no letter head, not signed by a bank official but has a date at the bottom. It doesn’t look legal. signed 7-16-12
    3. Equipment: FDD Gateway, virtual terminal, purchased. This means I don’t incur any rental fees.
    4. Monthly fees, maintenance fees and processing fees $0/- as signed and initialed by me. Wireless access fee also $0. BUT, I am being charged a minimum $15 fee from the month I signed up. I was told, when I use the services, only discount fees and other transaction fees would apply and no other fees.
    5. EFT: I asked for early termination because the whole thing is questionable. Fees are “$25 times each month for the life of the contract after termination”, applies to existing current term whether 1 yr or 3 yr.

    In the amendment, EFT clause, in 5 above, has been deleted in it’s entirety and replaced with “in the event the client terminates this agreement at any time prior to the end of the initial one (1) year term of this Agreement, Client shall be liable for EFT $175 effective date of termination. In the event that Client fails to pay the EFT, we may debit such amount from your account in accordance with the provisions of section 24 above.” Section 24 does not exist on my initial agreement.

    By deleting and replacing the clause with the above wording, the penalty of $25 X remaining months is deleted, the EFT only applies to 1 yr contract and no other term. Which agreement does this apply to the one I signed or the one they failed to give me? Has the bank shot themselves in their foot??

    6. Monthly and transaction fees have climbed to 6.5 +/-%.

    I definitely have a case. I have involved the bank manager because the agent has been giving me a run around since Aug 2012 and today is Oct 2013, I can’t sleep anymore. I don’t want to come back with any more excuses, they are extremely clever in evading and may do something else to have me sign other papers so everything is reversed in their favor. How do I avoid more hassles, I want out of this situation before it gets worse.

  14. Aaron

    Avoid Data-Link!!! 4 year contract – $495 ETF. The rep told me, “No early termination fee.”, but in the contract there is one.

  15. Sue

    I was very busy that day and signed an agreement. However, while having coffee the next day I read through the agreement and sent them a letter to cancel the agreement. Some of the flashy stuff the sales rep. talked about was not in the contract.

    They said to bad even though I sent the letter to them within 24 hours. The other thing is that I told them (before signing the agreement) I do not want any new equipment I wanted to use my existing equipment. They did send me a very nice letter signed by a manager stating they would program my existing equipment. They called and stated that they could not program my existing equipment and wanted me to sign for new equipment. I told them I’m not signing for any equipment I don’t trust them. They have been charging my account $30 monthly for 4 months and then $159. for PCI compliance fee. Now they want $480 for ETF.

    To date I have not processed any cards through that company. I sure would like them out of my life and out of my bank account.

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