Offering credit and debit cards as a method of payment can be a benefit for your customers, but is it worth it? It pays to do your research and choose the best payment processing service in Canada. For instance, a merchant service that requires that you sign a contract might not be in your company’s best interest.
Signing a contract means a variety of stipulations, many of which are not changeable. Businesses are built to grow and thrive, yet many merchant services don’t operate to recognize the changing nature of a business and its financial landscape.
There are many reasons why a payment processing service requires a contract, but these reasons don’t always slant in your favor. One of the main reasons a merchant service provider has you sign a contract is to lock you into a specific rate – one that may or may not be right for your business down the line. Learn more about the locked-in rate, and discover other reasons why you may not want to enter into a payment processing contract (or why you should cancel your payment processing contract now if you’ve already signed), along with things you can do to protect your business after the fact.
The Locked-in Payment Processing Rate
When small business owners lack the knowledge as to how merchant services operate, the payment processing services earn more profits. Credit card processing is quite confusing, and if you don’t know your options, you may find yourself locked into a rate that doesn’t match with your sales and can harm your bottom line in the long run. Most payment processing contracts can be three to five years into the future – with an early cancellation fee if you opt to end your relationship. And that’s not counting your terminal rental cancellation. Most terminal contracts are four years and are not cancellable. This means that even if you have to close your doors during the first year in business, you’re still responsible to pay for the contract on your terminal machine for the next three years.
What if you decide to only accept cash?
You could do that, but that can be a deal-breaker for some customers. The soccer mom who just picked up three kids after the championship match just wants to buy some pizzas and go home to celebrate. She has three different debit cards, but she didn’t stop at the ATM. Will she be happy if she has to go in search of a different store or hunt down an ATM?
Whenever you pay for something, you expect a certain level of satisfaction from what you purchase – especially if it’s a service that you pay (and will continue to pay) a substantial amount of money for. Payment processors often charge fees for every transaction you record (from 10 to 25 cents each, in most cases), as well as other fees, such as:
- Audit fees
- Charge back fees
- Conversion fees
- Excessive transactions fees
- Filing fees
- Over-limit fees
- Interchange fees
- Security fees
Once you sign your payment processing contract, expect to face a cancellation fee if you want to drop the service before you reach the end of your contract. Some small business owners who seek assistance from their merchant services provider experience long wait times on hold and overall lackluster service once they do answer your call.
Your Business is Growing, But Now You’re Stuck
When you first start your business, of course you have high hopes for incredible revenue, but you’re also realistic. So you sign your merchant services contract with humble aspirations. Soon, though, your business really takes off. Before you know it, you’re getting slammed by fees for excessive transactions. Can you catch a break?
Most payment processing contracts don’t allow the choice to change your contract once you sign it, meaning you’re stuck with that original contract for the duration if you don’t cancel – and if you do cancel, the cancellation fees for early termination of contract can be in the hundreds of dollars – or more.
You’ve Decided to Cancel – Now What?
Before you attempt to unsign your contract with your merchant services provider, you should prepare for the Early Termination Fee (ETF). But, there are ways around the ETF if you’re savvy on Canadian law.
Review past statements
Before canceling your contract, take a look at the last three months’ worth of statements from your provider. Have any of the fees associated with your merchant account been raised in the last 90 days without your knowledge? Aside from fees that are explicitly stated in the contract that will raise under certain circumstances, a merchant services provider cannot raise fees on an already instated contract without giving notice.
The Code of Conduct for the Credit and Debit Card Industry in Canada was established in 2010 and is updated often. According to the code, if a merchant service desires to raise fees associated with the provision of merchant services, this fee change must be made known to the merchant no less than 90 days before the change with the option to:
- Accept the change, pay the fee increase, and maintain the contract, or
- Not accept the change, discontinue the contract, and not be charged an ETF
If you choose to cancel your contract within 90 days in the event of a fee increase, according to the Code of Conduct, you can do so legally without having to pay the ETF.
It might still be a good idea to speak with counsel regarding exactly how to exit your specific contract, because, as with any business contract – the devil is in the details.
What if You Just Close Your Bank Account?
Some online sites give the option of simply closing your bank account to avoid paying an ETF. After all, the payment processing service has your account information and can make an ACH withdrawal at any time, right? Yes, they can – but, it is in your best interest, and the interest of your business, to exit your contract legitimately. If your payment processor is attempting to charge an ETF illegally, there are steps you can take to ensure your money remains in your account.
There are also other payment processing services that don’t require you to sign a contract, and which you can cancel at any time, such as Intuit’s Merchant Services for QuickBooks. With QuickBooks’ Merchant Services, you can accept credit and debit cards for payment without the pressure of a long-term contract. Cancellations are accepted whenever you want to, with no stiff penalty imposed. And, because it’s integrated with the QuickBooks line of software, your payments are processed and accounting is updated all in one step. QuickBooks Online can help you get paid faster. Start accepting payments today with QuickBooks.