A Way Out
Tactics for Exiting Your Contract for Free
Cancelling a merchant account contract without paying an Early Termination Fee (ETF) can be one of the most difficult problems a small business owner can face. In fact, most business owners who encounter this issue are often caught by complete surprise because the cancellation fee was never revealed during the account setup process (aside from a single sentence buried in the fine print of a 10+ page service agreement). The first thing to understand is that there isn’t a guaranteed method for getting out of a merchant account contract without paying a cancellation fee; however, there are tactics that can increase your chances of successfully exiting one of these contracts while keeping the providers out of your checking account.
Prevention & Action
This two-part article will cover the most important areas of merchant account cancellation, starting with how to prevent getting into this situation in the first place. Part 2 will discuss how to prepare for an account cancellation before notifying the processor, methods to both stop the ETF from being taken from your account, and recovering an ETF after its already been taken. Most of these tactics are gathered from either personal experience as a former sales agent of the merchant credit card processing industry, or from relayed actual merchant experience.
Part 1 – Prevention
How You Got Trapped
We can’t cover merchant account cancellation without briefly explaining how merchants get themselves into this frustrating situation. In the majority of cases, the problem stems from four mistakes: Failing to research a provider, trusting an agent’s word, not reading the fine print prior to signing the agreement, and not getting promises in writing.
#1. Failing to Do Your Research
If you are a new business owner, get ready to also become a professional researcher. There are a vast number of business-to-business product and service companies that want to sell you something. Unfortunately, there are also some very bad seeds in this apple. If you do not carefully research each company you are considering entering into business with, you run a very good chance of losing a lot of money. Merchant account providers are no exception to this rule and most seasoned business owners will tell you that the bad ones take a very big bite. Always, always search for the best providers for your business before entering into any agreements.
#2. Trusting a Sales Agent’s Word
Generally speaking, good companies have good sales agents and vice versa, but never take a sales agent at his word. Nearly all merchant account agreements explicitly state that the processor is not required to honor anything the sales agent says or promises. This is usually because the agent is not an actual employee of the company but, instead, an authorized reseller who operates independently and is paid solely on commission. Whether it’s poor training, ignorance, or malicious intent, agents constantly fail to verbally disclose important contract terms and fees. In fact, some will knowingly lie just to get a merchant to sign an agreement quickly. Even if the agent is a family member or close friend, you are playing with fire if you make your decision on the basis of a conversation alone.
#3. Failing to Read the Fine Print
Always read a merchant account contract before signing. It sounds like common sense, but a large percentage of unhappy merchants find themselves in a bad situation because they disregarded this cardinal rule. When you take the time to read the fine print, you will most likely encounter terms and conditions that were not disclosed or that cause confusion. Keep notes as you read and get clarification if you have questions. Keep in mind that many merchant account agreements are up to 60 pages long even though the signature portion may only be on the first or second page of the application. Bad agents will sometimes “forget” to hand over the pages with the fine print. Be sure you have the whole document before signing.
#4. Failing to Get Promises in Writing
Lastly, if an agent or a representative of the company makes a promise to you that contradicts a condition of the contract, get it in writing! If the agent is independent, get it in writing from both the agent and the company. Make sure the agent’s written promise states that they will personally be held responsible. Remember, independent agents can’t assign obligations on behalf of the processor because they do not actually work for the processor. You need to be able to go after the agent personally if they do not deliver. Such promises may be for things like waiving a service agreement length and ETF or paying an ETF of another processor if you sign with them. It may also be for reimbursement of equipment or waiving of other fees such as the despised PCI Compliance Fee. If you have it in writing, you now have recourse against both the agent and the company should they not deliver on their end of the bargain.
Need to Get Out Now?
On to Part 2!
On to Part 2!
Now that we have covered methods for avoiding a bad merchant account contract, check out Part Two of this article, “Cancelling a Merchant Account Without Paying a Fee.”
About Phillip Parker
Thank you for reading my review. I hope that it has helped you with your research.
My Qualifications
I'm a former credit card processing sales director who left the industry to start my own a small business. From the time that I starting working in the merchant services industry to when I left to write about it, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this insider knowledge to myself, so decided to build this website to help you research which providers to use and how to save money on rates and fees. I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers here. Simply scroll to the top of the page to find the search bar. You can also message me if you need any guidance.
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My contract states that my EFT and remaining monthly fees cannot exceed any limit set by my state government. I’ve tried searching the net for this information concerning my state of Wisconsin, without any success. Where can I find this information?
Hi Tammara, I would start by contacting your state’s Attorney General or Secretary of State. Someone from one of those offices should be able to guide you in the right direction.
I signed a contract 6/4/2014. I had to pay my previous processing company an early out Fee, Encore’s rep said I would receive my refund 2 weeks from the time I show proof that I paid the early term fee from old merchant. On June 8,2014 I sent them a copy from the old processing company (no letter head) and I pulled up my daily bank statement showing it was taken out of my account. I marked out all transactions except for where it showed early termination fee was taken out. I have been waiting for my refund. So today I call and I was told I need to show the balance at the time of withdrawal. Can I cancel my service with Encore at this time with no fee’s ? I do not feel it is none of there business what my balance is or was. Once again listen to sales person telling me how great there company is and now I’m out $650.00 and in a contract that I am not happy with do to customer service. Can you help?
Hi, i need to know if at all possible if you could help me with a contract that i thought was canceled when i closed my business in 2010? 5 people used one terminal bc we all rented rooms in one building. the sales lady told us if we closed our acct the cc contract would be cancelled with proof of an empty room via pictures. i shared the terminal and returned it to the company in the correct time frame so i would not get a penalty.we all closed our rooms down.it was 3 massage therapist and 1 other nail tech. i only tried it for 30 days. she came and saw the closed rooms and said the contract would be terminated.Then 3 years later it shows up on my credit report with me in dept for $2200. i trusted the sales rep for the cc company.what are some options i already filed a dispute with all 3 credit bureaus. how do i get this off my credit report without paying this huge amount. i tried contacting everybody that shared the terminal with me but they will not return calls or messages. please help.Tara
I have been with the same merchant service for 6 years. I want to cancel but there is a window for cancelling from December-February. Does this seem fair to you? I’ve been with them over 3 years, paid for my machine and they tell me when I can cancel!
I signed a merchant account but I’ve never used it, The cancellation fee $595.00, is there way to negotiate the cancellation fee? In the mean time I’m being charged $119.00. $16.00 a month just for having the merchant account.
I am selling my business, can the new owner assume my credit card processing contract so that there would be no early termination fees?
My merchant services contract ended on 10/7/16…a day I’ve long waited for… Only to find out I was to give them a 30-90 day written notice! My fault as I honestly didn’t see that and now they say it’s automatically renewed for ONE YEAR!!! I can understand month to month, but this is ridiculous. Do I have any recourse? Regardless I’m closing the account immediately as I now have another processor. Thank you-Barbara
I have already closed the account tied to them, but concerned what happens next. I see “800” numbers calling, but I don’t answer them. What actions will they take if I’m MIA? Or if they reach me, and I refuse to pay anymore? I have 2 cc companies I’m paying off, while working with a 3rd. All for the reasons you stated – trusting snake-like sales reps and not getting in writing what they’ve told me. I hate this industry- it’s killing small biz! Thank you for the info and any replies/comments are appreciated!
I changed my bank account and sent this to my merchant services sales representative that set me up with the machine, I also put a bad review on BBB and will do one as well on Yelp,
To whom it may concern,
Due to the previous situation that we encountered with your services,
From having the contract filled out, signed , and had the Social Security number from somebody other than the company owner completely wrong,
Having our transactions of over 2 weeks deposited into a wrong/ closed bank account,
Then sending me the 1099k form ( blank),after I had to contact IRS, and do all the follow up and legwork,I had to find out what numbers ( you needed to call), and figure out what forms (you needed to fill out), when this was obviously the responsibility of your department, I have no choice than to cancel my contract with Retriever,
I have had a really bad experience, which has caused me stress, headaches, and has been a real inconvenience for me, not to mention that I payed $50.00 out of my pocket to have the 1099 form filled out by my CPA,( and most likely the form will be somehow returned to you because this form needed to be signed but wasn’t by your department,
I am ending our contract, I realize that there’s an early termination penalty and other fees, I will have these fees paid when I find I am able too,
Credit Card Companies…Small Business!!!! They are NOT compatable…Small Business’s need the service but the Credit Card Companies are a huge rip off! Partly why I closed my business. This is the third CC Processor I’ve used and each and every one of them has been able to “STEAL” ridiculous amounts of money because “it’s in the fine print” or because just like all the unscrupulous crooks out there today they have access to your bank account and they can get away with withdrawing whatever they want. Not to mention they hire idiots …If you are from Eastern South Dakota and a man named Terry Rokusek comes a knocking with a ‘GREAT DEAL’ and he will be relentless…stopping often to get you to try whatever he’s pushing…do yourself a favor and tell him to take a long walk off a short…! Throughout the entire period I have dealt with him (he first worked for a processing company called Heartland) and after finally giving in and switching to Heartland which he PROMISED to save me money in my processing fees he comes to me suddenly and tells me they are not a good company and I should switch to this company, Card Payment Solutions because it will save me so much more monthly) and because my previous company (Dakota something? thru Merchant Services) had taken over $700 in terminal fees and I never could get a refund for that …not to mention Terry is local so I thought if I need something he will get back to me ASAP and he’s here every couple days so why wouldn’t I trust him? Right? (I guess I was the idiot). I didn’t research it…blindly trusted Terry and then I got hit with an early termination fee; which by the way he “promised” (I know his promises suck) that I would get back. Now I closed my business April 1st (2 months ago) and contacted Terry to get the charges stopped and every time he “swears” he will FAX the paperwork I need to do that and nothing. Sat the 3rd I called Terry, left a very nasty message, he returned my call and told me he needs to be yelled at because sometimes he forgets things, told me he would be in to see me the following Monday to get everything taken care of…it’s end of day Wednesday and still no Terry! I am trying to contact the company and take care of it myself but be warned…they hire guys like this! Not to mention they are anything but cheap!! A very very upset merchant! :/