Identifying Low-Quality Merchant Account Providers

Merchant Warehouse |

December 10, 2010

Unfortunately, not all merchant account service providers supply the full terms and conditions of the contract you are signing with them. This seems to happen all too often among less-established (some would say, “fly by night”) firms, and they certainly don’t mind your thinking that the application is the contract. It is most definitely not. However, a clever application form might say, in fine print, that by signing it you accept the terms and conditions that are to be part of the actual contract.

Reputable merchant account providers will conduct their businesses ethically and properly, and will present the full contract for you to read even before negotiating the final points. Companies that don’t are playing a variation of the “bait and switch” game, and this tactic, as practiced by certain companies, helps them to maneuver around the applicant. The only way to avoid becoming a victim of such a scam is to review your discussions, check your notes – and read the contract, every word of it, before you sign.

Piling It On

Doing business with a low-quality merchant account provider can do you much harm, as well as cost you big bucks. If you get a package deal, you may end up with used instead of new equipment, buggy payment gateway software, answering machines in place of live help desk support and other administrative nightmares. The worst parts, however, will probably be related to the contract, which could be full of spurious fees, vague language and “automatic” price increases.

If you are being charged for such things as monthly “statement preparation” fees, batch-closing fees, account maintenance fees, monthly minimum fees or even annual account “auditing” fees, you are doubtless being charged for things you do not need, and overcharged for the ones you do. These fees are the equivalent of “junk fees” and are a means to get more money out of applicants, and nothing more. These are the tricks of the trade for some of the low-quality merchant account providers.

If a merchant account representative assures you that the firm will waive the early termination fees, or eliminate the three-year contract term, you can conclude that the representative is not being honest. Even if they were to erase the hard-coded fees on their merchant application and write in “It’s all free,” you had better grab your running shoes and make a break for it. Account reps most certainly do not have the authority to waive any fees whatsoever, and it doesn’t matter what they say about it.

Word Games

Sales and account reps are good at playing word games, as a confused customer can soon be manipulated into being an overpaying customer. When the words “waiver” and “waiving” come up in the discussion, it is more likely that the reps are referring to the processing terms and fees on the merchant application, not on the actual contract. In fact, pay close attention to see if you are actually reading the legal agreement at all. You may just be looking at a “Highlights of Terms and Conditions,” not the complete, actual agreement. These highlights “look” legal but aren’t the full terms and conditions that you will be held to.

When examining the fine print of the full, legally enforceable merchant agreement, in addition to looking for contract terms and cancellation fee notices, you will want to find key language like “amendments.” A little reading should confirm that no provision of the agreement can be waived, amended or modified except in a written “codicil” or addendum signed by a company officer. Sales representatives do not have the authority to waive contract terms and conditions.

Remember, by signing some applications, you may be agreeing to terms you have not seen. Simply processing a single transaction can also obligate you to terms you may not know exist. Being aware of what you are signing, and agreeing to, is the only way to avoid unnecessary fees that can continue to accumulate and hurt you in the long run. Do serious, in-depth research on the different companies you are considering as merchant account providers, and be sure to choose one that has a good reputation and is willing to back up everything they offer. Better to be safe than sorry.