BACK

Your Business Credit

Can you ditch your merchant account for a better deal?

Summary

If you have signed a legal contract with a card processing company, you are most likely on the hook to follow the terms of the agreement, even if another company offers you a better deal

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Question for the CreditCards.com expertDear Your Business Credit,
I was with a credit card processing Company A. Card processor B comes in and offers lower price, so I went with B. I called A to cancel, then was told I have automatic renewal for three years in contract.

I never received contract from Company A. Company A faxes over copy with my signature but no initials on bottom of page as required by them. To get out of the contract, it will cost $3,300. Representative A asked to meet or beat B’s deal and, if not able, to let me out of contract at no cost.

Well, they were able to meet B’s per swipe charges, but added a yearly charge of $179. When I asked about the charge, I was told she would investigate and get back with me.

In the meantime, I put a stop notice with my bank and sent back the card machine. Almost three weeks later they took $3,300 from my account. Four days later I got an invoice from Company A, after they already took the money out. The bank says it is not responsible — after I requested a stop payment and was charged for it. Do I have any recourse or did I fall victim to shady card processor?  — Augie

Answer for the CreditCards.com expertDear Augie,
Sounds like you strike a hard bargain.

You need to get legal advice on your specific contract to get the right answer to your question, based on the feedback I got when I asked two attorneys about this. It is hard to tell if Company A is shady based on what you say — or is just acting within the rights of the contract.

It’s not clear why your bank allowed the $3,300 withdrawal three weeks after you stopped payments to Company A. But what’s more important is whether you’re legally obligated to make that payment.

To get some insight into your case, I spoke with Robert F. Brennan, an attorney in La Crescenta, Calif. He specializes in wrongful credit damage cases, as well as identity theft cases. He said that when you have signed a contract, negotiating a rate reduction does not end your contractual obligation to make payments, even though you may be tempted to stop paying.

Based on your note, it sounds like you signed a deal with Company A. Though you did not receive a signed copy in the mail and the company did not initial every page, the version that was faxed could still be valid. You need a lawyer to look at it.

I’m sorry to be the one to tell you this, but if you did sign a valid contract, stopping payment to Company A while you were working out a deal to modify the contract doesn’t leave you on very strong footing. “That’s the part that’s troubling to me,” says Brennan. Not wanting to make a payment doesn’t mean you weren’t obligated to make it.

You may want to have an attorney review the contract to see what recourse you have, but that will cost you money, Brennan points out. Typically, lawyers will charge you for an initial consultation.

Running a small business can be full of expensive learning experiences, and this may be one of them.

There’s nothing wrong with shopping around for a great deal on a merchant account — and making providers compete for your business — but you should never sign on the dotted line until you understand what you’re signing and are prepared to stick with the contract. As you’ve discovered, looking for a technicality that will get you out of a deal can be a lot harder than not signing it in the first place.

See related:When does a merchant account make financial sense?, Savvy ways to finance holiday inventory, Options for accepting overseas payments expand for small business

What’s up next?

In Your Business Credit

How to get cash for your business without credit

If you need to buy a few hundred dollars’ worth of supplies for your business but credit cards aren’t an option, you might want to examine your expenses, get a job, or both

Published: November 25, 2013

See more stories
Credit Card Rate Report Updated: May 23rd, 2019
Business
15.61%
Airline
17.50%
Cash Back
17.60%
Reward
17.62%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.