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Look Out for Early Termination Fees when Selecting a New Credit Card Processor

You may have scrolled to the bottom of a user’s agreement and clicked I Agree without looking through the many pages of fine print. You’ve decided you’re fed up with high credit card processing fees and switch companies, only to find early termination fees on your last statement.  Or you have heard about ETFs, or maybe you haven’t. Yea it’s wrong, but because agreement list is so long and copy is small you may have missed it.

What is an Early Termination Fee

Early Termination Fee which is also referred to as an Early Cancellation Fee (ETF) is a charge that is assessed by merchant account provider when you terminate the credit card processing agreement before an agreed-upon end date. Early Termination Fees are described as a provider’s compensation for the expenses related to closing a merchant account and are included in the contract.

Most contracts are 3 years (36 months) and they automatically renew for additional terms or go to month-to-month until they are cancelled. The fees associated with Early Termination usually cost about $295 and $495, and can be much larger (thousands) in contracts with Liquidated Damages clauses. The potential ETF amount decreases as you approach the end of the contract gets closer.

Where You Can Find Early Termination Fee Terms

Early termination fees come into play if you want to cancel the contract during the initial contract period. ETFs are usually discussed under the section of your contract called Term and Termination, Termination, or even Early Termination Fee. They’ll cover the specifics of the circumstances you are able to cancel the agreement and when any penalties (or ETFs) are applied.

Consumer Protection Laws

You may have dealt with ETFs before; a cell phone, cable, or apartment lease for a specific  amount of months. In order to cancel your contract early you will be faced with an extra fee–the Early Termination Fee (ETF). As a consumer, the fee might be capped by laws thanks to help of consumer personal protection laws. As a small business owner (sophisticated party), you might be on the hook for more because they presumed you know better and  should read and negotiate contracts better.

Why Early Termination Fees May Exist

Sometimes an ETF is a flat fee that the processor claims it needs to recoup the cost of setting up your account and programming your equipment. Early Termination Fees effectively function as punishment for merchants who wish to cancel. The real reason is they use this as a form of merchant retention.  Credit card processors which are inconvenienced by early termination should not be passing these fees to small business owners.  And if you lease credit card terminal, portable scanners or similar equipment from a processor, the hardware is usually covered under a separate agreement which may not be affected by your processing contract.

Want to Cancel Without Charges

Sometimes you will have a small cancelation window if the credit card processor raises its price of service, such as 30 days. This disclosure will usually be included in your monthly statement. You most likely won’t be contracted directly of the changes, so be diligent to check your statements on a regular basis and watch for any price changes.

If your salesperson promised the world and delivered nothing, or they forget to tell you about the various fees you have to pay every month there may be recourse. Or if your equipment never worked correctly even after you reported it to their tech support multiple times this may help to have reason to cancel early. Make sure to document your specific situation then you talk to your salesperson or a manager to see if you can be let out of the contract early, without having to pay the ETF due to the issues incurred.

Lastly, there’s no guarantee of a resolution but try escalating the complaint to the Better Business Bureau to see if they can help with a refund if you have been charged with one.

Initial Term VS Renewal Term Considerations

Credit card processors have a difference in cancellation procedures between the “Initial Term” and the “Renewal Term”. Check your contract because some there is an ETF for the Initial Term, but not for Renewal Terms as long as the processor is properly notified within 90 days’ notice.

Want a Credit Card Processor with No ETF

Don’t settle for complicated contracts or Early Termination Fees . Fortunately, you now have options with processors that employ state of the art technology. No need to sign long contracts or purchase equipment either.  Credit card processing companies like iWallet Business are free to sign up, no long term contracts excludes ETFs.

21st century business models offer processing using a smart phone or tablet and include month-to-month billing. No complicated contracts to read; iWallet Business discloses up front “you can cancel at any time without any fees”, alieving the need to sift through the fine print.

Businesses should not be punished with unnecessary fees  that’s why it is important to do your homework and sign up with transparent companies like iWallet Business that clearly state on their home page—No contracts, No hardware, No setup cost, No cancellation fee and No daily or weekly transaction limits.

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