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Understanding a Merchant Account Contract’s Length of Term

One thing that isn’t often mentioned up front is the term of the contract you have to sign to accept credit cards. When signing a contract to establish a new merchant account you are usually, but not always, committing to staying with the merchant account provider for a minimum length of time.

There are three different kinds of contract terms a merchant may be subject to. They are:

  1. Open Ended

    There is no term specified in the contract. The merchant can terminate the contract at any point in time without penalty. This is the ideal term for merchants.

  2. Specified Length

    The merchant is locked into the contract for a minimum period of time. This is typically two or three years but can be as liitle as one year or as much as four years. If the merchant terminates the contract prematurely they may be subject to fees and/or penalties for doing so. If the merchant terminates the contract after the term has expired no penalty will assessed.

  3. Auto Renew

    This is similar to the specified length contract except the contract automatically renews itself when it ends. If the merchant does not indicate to the merchant account provider that they wish to terminate the contract when its term expires they will automatically be locked in for another term subject to the same penalties of early termination. This is the worst kind of contract a merchant can subject to.

When shopping around for a new merchant account provider, be sure to find out what type of contract they offer. If there is a contract term involved, make sure you are aware of the termination fee (also known as a cancellation fee) and whether the contract is auto-renewing. The last thing you want to do is get locked into a contract for a long period of time and find leaving difficult because the termination fee offsets any savings you may have gotten from a new merchant account provider.

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One Response to “Understanding a Merchant Account Contract’s Length of Term”

  1. Merchant Account Facts

    [...] One thing that isn’t often mentioned up front is the term of the contract you have to sign to accept credit cards. When signing a contract to establish a new merchant account you are usually, but not always, committing to staying with the merchant account provider for a minimum length of […]Read full entry [...]

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