How long should my merchant account contract last?

How long should my merchant account contract last?

Merchants often wonder how long their merchant account contract should last. This bit of information should not go overlooked when making a commitment to a merchant account provider for a set length of time. Merchants who are new to business do not want to discover that their contract has unfavorable terms.

A merchant account is needed in order for your business to accept Visa, MasterCard, American Express or Discover cards. Consider the various kinds of contract terms you may be subject to before establishing a new merchant account. Choose one that will best suit your operation's needs and ask about contract termination fees, as well.

• Length-specified contracts: In this type of agreement, the merchant agrees to a contract for a minimum length of time. These contracts can range anywhere from one to five years, but are typically between two or three years. If the merchant decides to prematurely terminate the contract, they may have to pay an early termination fee.
• Auto-renewal term: This merchant account contract is automatically renewed if it is not cancelled once the specified length of the original contract has expired. The agreement is automatically renewed and the merchant is locked into another full term.
• No-term merchant accounts: Month-to-month merchant accounts can be cancelled at any time without incurring any type of penalty fee. This contract is open-ended and no term is specified.
• Early termination fees: An early termination fee can be charged by merchant account providers if a merchant ends the contract before the agreed term. Some may also impose a fee for potential lost profits. The market is highly competitive when it comes to acquiring new merchant accounts. Use that to your advantage when getting quotes from various providers.
• Long-term agreement vs. month-to-month: Some merchants may be convinced that a long-term agreement provides better benefits, such as a guarantee of a price quote. This is not always the case if the merchant account provider offers a low teaser rate. Make sure to read the fine print and know that providers have the ability to increase rates and fees as long as they give notice of any change of terms.

Published: July 21,2023