To Be, or Not To Be...In a Contract

"I hate my credit card processor, but it's going to cost me $1000.00 to switch."  Unfortunately, I've run into situations like that far too often.  While there can be legitimate reasons to be in a contract, such as a price guarantee, or for free or reduced-cost equipment, many contracts seem to exist simply to make it difficult for merchants to make a change, even if they're unhappy.

It is true that your processor went through a certain amount of expense and effort to secure your business.  A reasonable exit fee, therefore, could be understood, but what is reasonable?  That's only for you to decide.  My providers often have no exit fees at all.  We want you to remain our client because you truly like the products and services, not because there's a $500.00 gun to your head.  Having said that, I've seen exit fees as low at $30.00.  Quite commonly, two hundred to three hundred dollars will be charged to businesses that terminate contracts early, and the duration of most contracts is between 2 and 5 years.  Such fees may seem reasonable, and in some cases, a merchant can save that much money in a matter of a month or two, making a change more palatable.

There are times, though, when the early termination fees are nothing short of usury.  I've seen exit fees over $1000.00, and sometimes even multiplied by the number of months remaining on the contract.  Be very leery of entering into an agreement such as that.  There's a good chance you'll never see your representative again, and the processor has no motivation to keep you satisfied, since there's no way you can feasibly make a change.  Chances are, if you look closely, there'll also be an automatic renewal if you don't notify your processor of termination within a certain window of time. Such tactics are often used by traveling sales personal who seek to sign as many contracts in your community  as possible, before moving on to the next town, leaving you with little or no support, and no recourse.

So while it's true that not all contracts are bad, be sure you know what you're getting into up front, and by all means, avoid any contract that includes an early termination fee that's more than you would be willing to pay for better service if the need should arise.