How to Cancel a Merchant Services Contract

Need to cancel and close a merchant service contract? Discover your options for cancellation, best practices, and how to avoid future pitfalls.

So, you’ve gone through the strenuous process of choosing a merchant account provider that you thought was going to be perfect for your business. But then it wasn’t. Now you’re in a tricky spot, stuck in an expensive contract with no way out. So what do you do?

We wish there was a simple answer to this common problem, but unfortunately, there’s not. In some cases, it simply will not be possible to get out of your contract before your predetermined end date. Moreover, even if you do find a way out, it will not be easy and it will most likely cost you.

Book a consultation with our payments experts to help you cancel your merchant account, and avoid early termination fees.

First Things First

The best way to avoid the struggles of getting out of a bad contract is to do the hard work the first time around. No one wants to hear this—especially if you’ve just spent the last months painstakingly deciding between processors, and gateways, and merchant services—but reading through that merchant processing agreement with a fine tooth comb and making sure that everything is how you wanted it to be is the only way to prevent future discontent.

The Past is in the Past

Now what you really need is a plan to tackle all your options for getting out of your contract. The easiest—and we use that term lightly—way to get out of a contract early is if your situation falls into one of these four categories:

  1. Your provider has violated their end of the deal, whether that’s by charging undisclosed fees or failing to provide agreed-upon services. If you discover that your processor isn’t keeping the contract, you can cancel your contract without any repercussions. Be careful though, as you typically only have 30-90 days to leave the contract after a breach occurs before cancellation fees are applicable again.
  2. You were misled by the representative who sold you the contract in regards to pricing, contract length, cancellation terms, etc. Of course, to prove that you were misled, this information must have been in writing, otherwise you’ll have no recourse. Just like scenario one, there is a time limit on when you can make these claims against a processor, so bring it up as soon as you catch wind.
  3. In rare cases, it is possible that a new processor will be willing to pay your early termination fee from the contract you’re trying to get out of. If you’re lucky enough to have an offer like this, make sure to take it! Just make sure you won’t have any of the same problems with your new processor to avoid going through all of this again.
  4. The final situation isn’t a great one to be in, but if you’re going out of business you can get out of early termination fees. Many cancellation fees are based on “liquidated damages,” or how much the processor would expect to receive from you had you completed the original contract.

Even if you do fall into one of these categories however, you won’t be able to just walk away from your processor without some sort of fight. You also will need to seek legal help to prove any of these scenarios, so make sure to factor those costs into your decision making.

Best Cancellation Practices to Avoid Early Termination Fees

If none of those claims pertain to you, it’s going to be harder to get out of your contract. However, every contract is different, so there really is no harm in assessing your options. If you turn to the internet, you may come across the advice to simply cancel your merchant account to cut off the money at the source. We cannot say that is never an option (if your processor is disregarding their end of the contract and charging you ridiculously high fees, it may be the best way to get their attention at the very least), but hardly is it ever the right option. Processors can find other ways to charge you—which will put your personal assets at risk—and they could pursue legal action for this breach. Instead, follow these practices to ease your cancellation process:

First, contact the cancellation department of your provider to verify the cancellation terms. If a dedicated account manager is not available, reach out to the general customer service or specifically the cancellation department for assistance. This ensures you are following the correct procedure and have documented proof of your attempts to cancel.

Second, understand the legal agreements with your payment processing company. Consult a lawyer for advice on the legal terms and how local laws might provide options for cancellation without fees. Proper communication and documentation are crucial when dealing with a payment processing company to avoid unnecessary charges and legal complications.

1. Read Everything

The very first thing you should do when you’re thinking about leaving your contract is to simply read through it very carefully, paying special attention to your merchant ID number. Make sure there isn’t a clause in there that allows you to leave under certain circumstances or occasional opportunities. You may even want to get a lawyer to read through your contract in case you don’t understand certain terms you agreed to. It’s also possible that they’ll catch something you missed.

2. Understand Your End of the Deal with Your Merchant Account Provider

After you’ve read through everything, if you still believe that leaving the contract is your only option you have to make sure you understand what’s at risk for you. Check your contract for a personal or individual guaranty (the section may also be labeled “Individual Guarantor”). This section will lay out the fees, penalties, and damages that will fall onto you personally if you end your contract early, including early termination fees. As the signer of the contract, you are at risk to lose more outside of what the company is losing. Once you understand your personal guaranty, it will be easier to assess the risk factors associated with going forward with the cancellation.

3. Get Everything in Clear Writing from the Cancellation Department

If you’re at the point where the cancellation is going to happen—you’ve read through your contract and assessed your personal risks—this is the most important step of the process. Make sure you have all the original documents you were given at the start of the contract, and going forward get everything your processor agrees to in clear writing that can be referred back to. Bringing the agent who sold you the contract back into the conversation is also a good idea at this point because in most cases it is their job to make the final decision about your cancellation.

Once you’ve negotiated to terms you both agree with, make sure that you send the actual merchant account cancellation letter by certified mail. Include your business address and business phone in the letter to ensure clear communication and proper identification. You can usually find who you’re supposed to send this to somewhere in your contract.

Is that all?

Like we said, this isn’t an easy process. It’s not even one that will be possible in many cases, so if you’re going to go through this, do it right. Make sure to monitor your business bank account for any unauthorized charges after cancellation. If anything, it’s a great learning process for how to get better contracts in the future.

If you’re hurting for a new payments solution or need advice on how to improve your current situation, reach out to the payments experts at Swipesum

Michael Seaman

Michael Seaman

Michael Seaman is the co-founder and CEO of Swipesum. A veteran of the payments industry and former employee at one of the largest payments companies, Michael, along with his brother Stephen, has led Swipesum since its inception in 2016. Swipesum is committed to providing innovative payment solutions and exceptional service to its diverse clientele. In his free time, Michael enjoys traveling with his wife Kelsey and their three children, pole vaulting, and engaging in typical Midwestern dad activities.

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