Most Merchant Services providers have a contract for 3 years. The provider incurs expenses setting up your merchant account and therefore wants to ensure that you keep processing with them for a minimum of 3 years.
Should you want to switch to another processor and cancel your agreement before the 3 years is up, you incur an “Early Termination Fee”. Many times this fee is hidden inside the 40 pages of your Terms and Conditions. So we suggest you ask your salesperson to point this out to you before you sign up and start processing. This fee is usually $300 or $400. You can evaluate if the new processor is saving you more money than the cost of the fee. It may save you more money to switch than to keep the old processor for the term of that agreement.
By the way, Electronic Money Company has no termination fee. We don’t need to charge the fee because we treat our clients like family and nurture them with our superb in-house service and support. Our clients tend to stay with us for the life of their business.
In addition to the “Early Termination Fee”, some processors also have a “Liquidated Damages Fee”. Watch out for this fee, because it means that if you terminate your contract early, you owe them an average of all the fees they would have collected from you until the end of the term, even though you are not processing with them anymore. “Liquidated Damages” adds a huge burden that virtually no one wants to incur. And so your best recourse is to keep processing with this same merchant services provider even though they have lousy service and high fees. Again, read your Terms and Conditions and look for this mafia-like tactic. Electronic Money Company does not have a “Termination Fee” or a “Liquidated Damages Fee”. Contact us for a rate review of your fees!
Many processors charge a monthly minimum fee. The reason for this charge is because the processor has support services that they provide even if the merchant does not have any credit card charges for the month. They have staff in place to answer questions about merchant statements or credit card terminals that aren’t functioning properly. This monthly minimum fee is usually around $25 per month. It gets assessed if you have transactions that do not generate at least the monthly minimum amount for the month. For example, if you run one $500 transaction and your rate is 3%, then your fee is $15.00. This is less than the minimum, so you also get charged the difference of $10 in addition to your rate of $15.00.
The merchant processing salesman can scam the merchant with these fees because they are hidden in the fine print of the Terms and Conditions. 90% of the time, the merchant is unaware until their bank account gets hit after they switch processors. The only recourse that makes sense is to keep the old merchant account open and pay the monthly minimum until the end of the term while processing with another company. An alternate recourse is to shut down your bank account so the processor can’t find any money to withdraw from it, but that is a cumbersome process and may not be worth the trouble.
We even occasionally run into merchants who are paying two monthly minimums to two different processors all while they are processing with a third company! They ask how we can help. We can’t. But we can explain it all to them and guide them on their contract end dates. We guide them through their terms and conditions and explain how they have to follow strict rules on notifying the processor 30 days before the end of the term before it auto-renews for yet another year! At least they are educated and have a plan to move forward.
If you want to work with an honest merchant services provider, give us a call at 505-296-2847.
