Article | February 21, 2019

Don't Be Shocked By Your Processing Partner's Fees

Control Site Payments

If you’re like most people, when you’re handed a 30-page contract, you skim over it, make sure it looks okay and sign on the dotted line. When it comes to payment processing, resellers should cross all the t’s, dot all the i’s and read it from cover to cover. Yes, it may take some time, but that dedication could save your merchants’ hundreds if not thousands of dollars, and even your reputation.

Most service contracts have a provision for early termination fees. Take your phone, cable, or internet provider for that matter, and you’ll play a flat fee for canceling, no matter what the reason. For payment processing, early termination typically results in a one-time, flat-rate fee for the merchant as well.

However, some processors have deviated from the flat-rate fees. Their termination fees are either a flat fee or the amount of the missed processing fees after the contract is cancelled, whichever is higher.

Partner Fee Example

A merchant signs a three-year agreement. After six months, the merchant’s average fees are $200. If the merchant cancels, they now owe the higher of these amounts: 1) $595 per location, OR 2) since the merchant has 30 months remaining on the contract, and averaged $200 in fees per month, $6,000.

Avoiding Liquidated Damages

This $6,000 charge is called liquidated damages. Liquidated damages are defined as “damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).” In simple terms, the merchant is on the hook for the credit card processor’s missing fees, and it’s not cheap.

Imagine the surprise your merchant will have when hit with a fee this high. Why should they be required to finish the duration of a contract if they are getting an unsatisfactory product, terrible customer service, technical problems, or have a valid reason to leave? Think of the damage to your reputation and potential referrals — and the comments you’ll receive in online reviews.

Before referring merchants to any processing company, look at the early termination section of their Merchant Processing Agreement to ensure there are no costly surprises for you and your merchant. If the payment processing company you’re using has these fees, turn the other direction, and find one that doesn’t. Trust us, it will save you time and money in the end.