Insist on month-to-month terms and avoid early termination fees

Be aware of early termination and cancellation fees that are common in today's merchant contract.

Bankcard pricing is complex and difficult to teach. To solve this problem, many corporate offices hand down "rate grids" to sales reps. A grid simplifies quoting rates to merchants for proposals. Move your finger down one side of the grid for sales volume and another finger across the top for the average ticket to meet on the quoted rate. Sounds simple enough.

In a competitive market, using a grid creates a common problem with sales people on commission or quotas. Needing a better rate to win the bid is as simple as rounding up. While this new rate quote sounds too good to pass up, be careful. If your ticket size and sales volume do not meet the qualifications / projections on which your rate quote was based, a few months down the road your rate and fees will be increased.

Next add the "hidden" cancellation fee. Coded into the contract fine print is a fee that basically says: if you are unhappy enough with your service or pricing to cancel, you must pay for the privilege to do so. The cancellation fee becomes a deterrent to further change, your bottom line cost is now higher than the other proposals you originally reviewed, and you now rely on a customer-no-service call center.

Introductory pricing schemes also go hand in hand with cancellation fees. Introductory rates are used to entice unsuspecting merchants. The few months of losses incurred by the processing company are budgeted as acquisition cost knowing that losing rates will be evaluated under the terms of the contract and adjusted to profitable levels.

The moral of this story: If it sounds too good to be true, look for cancellation fees.