No contract credit card processing is a promise very few processing companies can offer. If you’ve researched how merchant accounts work, you understand that every merchant account requires a contract to be signed, but you’ll be happy to hear that not every company requires these contracts to have cancellation fees or term limits.
An agreement that can easily be walked away from can be a life-saver when dealing with the complicated world of credit card processing. A month-to-month contract just means that you will not be penalized with termination fees if you change your mind about your provider.
A set term is given to those who choose a fixed contract, and it must be followed through with if the merchant doesn’t want to pay a fee for ending the agreement beforehand. A fixed contract can also be cancelled without penalty, but you’ll need to remain in the contract for the allotted time without renewing it. The typical length of contracts is 3 years.
Automatic Renewal Contracts
A third contract type, automatic renewal, in which a successive contract term is tacked on after the expiration of the initial contract term, is the most dangerous because many merchants are unaware this is occurring to them. Processors tack on additional one year periods to contracts unless cancellation occurs three months prior to the end of the current term.
Equipment Leasing Contracts
Some business owners are snagged in with this equipment leasing contracts because of false claims of being free. “Free” equipment poses as no contract credit card processing, but even equipment can have a leasing term. The average leasing term for equipment is 4 years! The card processing organization makes their money by charging you monthly lease payments and monthly insurance bills on top of that. You can often buy the necessary equipment outright for a few hundred dollars without being stuck in this kind of contract. Like fixed and automatic renewal contracts, you cannot leave these without a hefty termination fee. The termination fee is usually to buyout the remaining number of months on the contract…in full! If that weren’t bad enough, at the end of the lease you’ll be required to return the equipment. You don’t even get to keep it!
Contract Exit Fees
Two kinds of termination fees are especially costly when coupled with fixed or automatic renewal contracts.
- Prorated termination fees seem acceptable because they reduce as the merchant gets closer to the end of the contract term, but are still dangerous because they start at a higher price point.
- A liquidated damages termination fee literally multiplies your dues based on how much the payment processor is making off you. If a card processor is profiting $200 a month from your merchant account and you have ten months until your contract ends, you will be charged $2,000 to cancel your account.
And just because you’re locked into a contract doesn’t mean that your processing rates and fees will remain the same throughout the contract term. In fact, it’s quite the opposite. It’s a common strategy by unethical processors to raise rates throughout the contract term. From their vantage point, they either collect higher profits on your account or they force you to leave early, thereby collecting their hefty termination fee from you.
Apply for No Contract Credit Card Processing
Many companies promise no contract credit card processing, but few follow through. If you’d like a no contract credit card processing plan that saves you money and has your best interest in mind, click here.