How to get out of a merchant services contract

Merchant services contracts and the payment processing services they provide are vital to businesses of all sizes. Unfortunately, there are times when you may find you need to cancel your contract early. Common reasons for early termination of a merchant services contract include:

• High fees
• Missing features (e.g. no chargeback mitigation)
• Sale of a business
• Being mislead by a payment processor or sales agent

In many cases, early termination of a merchant services account comes with penalties and fees you’ll likely want to avoid. Fortunately, while it isn’t always easy, there are ways to exit your contract without paying excessive fees. In this article, to make sure you’re prepared for what could be an uphill battle, we’ll review what you need to know about how to get out of a merchant services contract.

The prerequisite: Understand your contract

Before you decide what route to take to get out of your merchant services contract, read the contracts you signed and study your payment processor’s terms of service and cancellation policies. In many cases, you’ll be able to find some or all of this information on the vendor’s website.

Understanding what rights and obligations you have under those agreements will help you make an informed decision on what option below will work best for you. Additionally, you’ll be aware of actions you may need to take in addition to cancelling your contract, like returning leased payment processing equipment.

How to get out of a merchant services contract option 1: Pay the fee

The most straightforward option for getting out of a merchant services contract can also be one of the most expensive. In most cases, merchant services contracts will have an early termination fee (ETF) included. Sometimes this fee is called a deconversion fee or other similar name. Whatever the name, if there is a fee you can pay to get out of the contract, that can be an easy — but expensive — way to make an early exit from a contract. In some cases, paying the fee makes business sense. However, chances are you’d prefer a method that doesn’t come with the additional costs, so let’s move on to other options.

How to get out of a merchant services contract option 2: Find a reason for a free exit

We recommend reading your contract, terms of service, and cancellation policy because you may find a reason for a free exit if the vendor has violated the terms. Additionally, there may be local laws providing you with a legal way out of your merchant services contract without a fee.

For example, in some states, if your fees were recently raised, you may have a one to three month grace period to cancel your account. Similarly, if you can prove you were mislead about cost or service by an agent of the payment processing company, you may be able to cancel without paying an early termination fee.

Pro-tip: Document everything!

Every formal communication — like officially requesting cancellation of your service — should be in writing. If things go south, you may need to prove your case in court so be prepared by documenting all your correspondence and supporting evidence.

How to get out of a merchant services contract option 3: Work with the processor

If you have no clear legal path for an early exit from your contract, the best approach may be to contact your vendor and work with them to explore options. Being courteous and professional can go a long way. In many cases, the sales agent that sold your contract decides whether or not to charge you early termination fees, so a good relationship can go a long way here.

If the friendly route doesn’t work, and the vendor has been less than fair and transparent, you may want to threaten to leave a bad review or report them to a consumer protection agency like the Better Business Bureau (BBB), a government agency like the Federal Trade Commision (FTC), or the vendor’s acquiring bank. While doing this might pay off, don’t lie or get emotional. Stick to the facts and make the case if you have one.

Should you close your associated checking account to avoid fees?

You may see some recommendations to close the checking account associated with your merchant services contract to avoid additional fees. This can be a wise step if you’re sure you were legally in the right when ending your contract, but be careful! There may be legal and business implications to closing the bank account associated with your merchant services contract.

For example, some vendors may attempt to add you to the Terminated Merchant File (TMF) for early termination. The TMF is effectively a blacklist for businesses that had card processing services cancelled. In many cases, if your business is listed on the TMF, it can be difficult to get approved for a merchant account with another vendor.

The best approach: Avoid bad contracts to begin with!

The best way to avoid the hassle and expense of getting out of a merchant services contract early is to avoid bad contracts to begin with. Often, businesses that need to get out of a merchant services contract are in that position because of misleading sales information or simply not paying attention to contract terms. If you choose a payment processor with a good reputation and read your contracts and service agreements before signing, you greatly reduce the likelihood of being charged an early termination fee.

At TailoredPay, we believe in fair, affordable, and transparent terms that enable your business to scale. We’re experts in high-risk merchant accounts and can help you find the right payment processing services for your business. To learn more, check out our merchant account FAQ, give us a call at (888) 599-6482, or fill out a simple form to get started on your next merchant account!