Merchants get solicited to switch their merchant processing all the time. When they switch, merchants don’t realize that they need to close their old merchant account. If they don’t, it is like leaving an old bank account open, and the bank racks up fees. A merchant account is no different. The old processor does not know your account is not being used until you tell them you are closing it. And it is the merchant’s sole responsibility to notify the old processor that they are terminating. The new salesperson with the new processor cannot legally close your old merchant account, just like he cannot close one of your bank accounts. Even if the salesperson says he will do it, he will not be able to, and therefore, it will not get done. Until the old merchant account is closed, the processor will keep charging you a monthly service fee, PCI compliance fees, plus any other monthly service charges that you had before. In fact, it is prudent to fax or email a signed close letter to the old processor, and then get a confirmation that they received it. Otherwise, messages get lost and the account remains open, racking up charges. We have noticed some merchants paying on old merchant accounts for years.
What about closing out a lease on equipment with an old processor? The lease was not with the processor, but with a leasing company that the processor worked with. Therefore, the lease is totally separate from the merchant account. The merchant must complete all the payments on the lease even if the merchant will not be using that piece of equipment with the new processor. The term of the lease remains in place, so it is the merchant’s job to know when the term is up, and what requirements are in the contract for the merchant to follow through the term, and at the end of the lease. One such requirement is that the merchant notify the leasing company that they wish to terminate the lease by either sending back the equipment or buying out the equipment. With either choice, the merchant must complete all lease payments through the end of the lease. There is an additional fee to buy out the equipment. Check lease paperwork carefully and be sure to follow all instructions relating to ending a lease, because otherwise, the lease is automatically renewed and fees will keep getting deducted automatically from the merchant’s bank account. Again, we have noticed merchants who have been paying on leases which have expired for many years after the expiration.
Before you actually sign up with a new processor, be sure to check with the old processor and make sure you understand the terms of your contract with the old processor. There may likely be termination fees or even more burdensome, liquidated damages fees. Liquidated damages means you have to keep paying the old processor through the end of their contract with you so they keeping making the same profits even if you no longer use their service! I am not kidding. Please read our blog here, to educate yourself regarding these exorbitant termination clauses, which are more common than you would imagine.