Red Flags in Merchant Processing Contracts
Honesty, integrity, clarity. For over twenty years, Ascent Payment Solutions has provided the lodging and vacation rental industry with simple and secure solutions for their payment processing needs.
We believe in earning our client’s business and trust every day by providing the best solutions and service we can. There are no early termination fees to work with Ascent.
Can your processor say the same? If you haven’t read the fine print on your processing contract, we can help. Below are some red flags to watch out for.
Early termination/cancellation fees
Sometimes called an “exit fee”, this is a fee or penalty charged by your existing processor if you move your business to a different payment processor.
Sometimes a processor will hide the fee they’ll charge you to leave by burying it in a liquidated damages clause or simply in the termination section.
Watch closely for language that requires, should you move to a different processor, that you pay your existing processor a fee equal to the total of what they expected to be paid over the entire term of your contract. The math often looks like: the monthly fees you pay that processor multiplied by the number of months left in your contract at the time of termination.
Translation: you could be forced to pay thousands upon thousands of dollars for wanting to move to a processor that is a better fit for your business.
Fees for lack of processing
Sometimes an agreement will give the processor the right to terminate should you not process within a certain timeframe after signing up (regardless of the reason). Worse yet, some contracts allow the processor to terminate your contract AND charge you a hefty fee for that "privilege".
If your processor has long term requirements (eg. you have a multi-year contract), look closely for your rights and responsibilities as defined in the agreement:
- Under what circumstances will your processor allow you to terminate the contract?
- What gives them the right to terminate?
- Are there any fees or other punishments they'll assess? Under what circumstances? How are those fees calculated?
We’ll Read the Fine Print with You
With these red flags in mind, we urge you to re-read your current processing agreement and understand your obligations under your existing contract— even if you are happy with your present service and have no immediate plans to change processors. And an industry insider warning: Pay very close attention to auto-renewals that change the terms of your agreement and tack on hefty fees, with or without your consent.
If you need help with deciphering your current contract or have any payments questions, give us a call or drop us a line.