8-7 Merchant Account Contract & Cancellation Penalties

Merchant Account Contracts & Cancellation Fees

Possibly the most notorious and feared feature of a merchant account is the dreaded merchant account contract and cancellation fee. Some of the largest third-party processors and acquiring banks in the industry impose contracts and cancellation fees on their merchant accounts. Ironically, MasterCard specifically recognizes this practice as unethical and unacceptable in the ISO Guide to Working with Acquirers that the card association giant published in 2002.

Regardless of MasterCard's specific mention of the contract and cancellation fee, it is still going strong in the industry. However, this does not mean that it is an acceptable practice. There is no benefit to getting a merchant account with a contract term and cancellation fee. Regardless of what marketing may portray, merchant account contracts do not guarantee or lock-in low processing rates, and they do not offer any added benefits or securities over merchant accounts that do not have a contract. When shopping for a merchant account, look specifically for any account that does not have a contract of cancellation fee whenever possible.

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