Almost all processors charge an Early Termination Fee (ETF) if you leave before the term of your contract. They do this because they are obligated to keep your account on file for 6 months afterwards, just in case there are any chargebacks. The early termination fee needs to cover this cost and any other administrative costs involved with closing your account.
But many processors also use these ETFs to lock you in to staying with them. They make them so high that no matter how bad the service or how much they nickel and dime you, you can’t afford to leave.
What should you look for when signing a contract with an ETF? ETF’s should never be more than a few hundred dollars and, this is very important, ETF’s should also be a pre-set number. Never get roped into signing a contract that charges a percentage of your processing times the length of time left on your contract.
Also, if your current processor comes to you in the middle of your contract and offers to lower your fees, make sure you don’t sign without seeing if they have changed your ETF. This happens more than you think.
If they come in during the term of your contract and offer to put you on “platinum” service or something similar for no extra charge, run as fast as you can. There really are no levels of processing service in the actual credit card processing, excluding things like equipment, software, and security. You are either processing or you’re not. This tactic is typically a cleverly disguised way for companies to extend your contract. They get you to sign a new contract with what is often a hidden and prohibitive ETF that makes sure they have you trapped for 3 more years. Most people don’t find about their new ETF until they decide to leave. Despite their severe displeasure when they figure out they have been duped into signing a contract that has trapped them, they have no recourse. The companies won’t budge.
Of course, it stands to reason that any company that has to resort to getting customers to stay by making it too costly for them to leave, are probably not being honest in other aspects of their processing either….hence customers wanting to leave them.
At Swipe for a Cause, we don’t think anyone should have to continue doing business with a company that they are unhappy with. So our ETFs simply cover the cost of us closing accounts. If someone wants to leave us, it is very affordable for them to do so.
Yet, despite our low ETFs, our customers don’t leave. While the national attrition rate is 35%, ours is under 5% and most of that 5% have left because they have closed up shop, have been bought out or they bought into proprietory POS systems…another trap, by the way. Out of the few merchants who have left us on the premise of getting better rates, about half of them have come back. Some figured out quickly that, despite promises of great savings, they were actually paying less before they left us. The others miss our hands-on service.
So before signing any credit card processing contract, make sure you check out the ETF…even if it is just an amendment to your old contract. Don’t get stuck processing with a company that retains merchants by making sure they can’t afford to leave.