Contact Sales: 888-592-7075


Five Crucial Details to Confirm Before Signing a Merchant Agreement

Closeup of womans hand writing on paper


Businesses must sign a merchant agreement when choosing a merchant services provider. Each credit card processor or merchant services provider has their owner agreement. As with all legal documents, it is important to understand what you are agreeing to. 


Many of the merchant services agreements are either long or in fine print. Most, if not all, of the details in the terms and conditions section cannot be changed. 

Some merchant service providers have a digital application, while others use ole fashion paper applications. When signing a paper application, confirm that you are being presented with all of the pages, not just the signature pages. This happens more often than we’d like to think.


The merchant services industry has some very good providers of payment processing. However, there are still unscrupulous independent representatives and sales organizations that have details in the fine print which could put your business in serious trouble.

Having a full understanding of the terms and conditions of the agreement which you might be signing is crucial.

Our recommendation is that you get in writing (via email preferably) from a representative of the merchant services provider you are evaluating to confirm if the following details are in their merchant services agreement.


Here are the Five Crucial Details to confirm before signing your next Merchant Services Agreement. We have listed these items in order of least to most important.

1. Opt-Outs

Opt-outs are an easy way for additional fees to be added to your merchant account. It typically happens where if you don’t contact the merchant services provider in 90 days, an additional monthly fee will be added to your merchant account. The merchant services provider is hoping that you will be occupied with your daily tasks of running a business and you will not have time to contact them to ask to have the fee removed.


2. Termination Fee

An early termination fee is assessed if you decide to cancel your merchant account prior to an agreed upon date. Many merchant services agreements have a termination fee, however, in recent years, we have seen more companies move towards a month-to-month agreement with no penalty to cancel. Early termination fees typically run between $295 and $750. Some companies charge this fee even if your company goes out of business or sells to a new owner. Be cognizant of the amount of the termination fee, if there is one. This is the one item out of the five that is sometimes negotiable, depending on which merchant service provider you choose.


3. Contract Length

If there is a termination fee to the merchant agreement you are evaluating, confirm the length of term. Most often, if there is a term, it will be three or five years. There can be a contract length listed in the merchant application, however, as long as it has a $0.00 listed as an Early Termination Fee, it should stand as a month-to-month agreement with no cancellation fee.


4. Auto-Renewal Term

The auto-renewal clause in a Merchant Services Agreement is where things could get ugly for your business. You might be fine with committing to three years, however, if the term auto-renews for an additional two years, it could spell trouble for your business. 

How so? There is a likely chance of ongoing rate and fee increases. At this point, you would be stuck with a high termination fee that could cost your business significant dollars to break a contract that you thought was only a period of three years.


5. Liquidated Damages Clause

Warning! Warning! Warning!

A liquidated damages clause in the agreement can make it almost impossible to change processors. 

A liquidated damages clause means that if your business stops processing, the merchant services provider will charge you for how much profit remaining they expect to earn over the lifetime of your contract. 

For instance, let’s say your merchant services provider is earning $500.00 per month from your business in credit card processing fees. You had signed a three year contract in this scenario and due to unforeseen circumstances, your business needs to cancel its merchant services after month 18. This means that you have 18 months remaining at this point. Your merchant services provider will then charge your business 18 x $500 = $9,000


An even worse circumstance is when a Liquidated Damages Clause is combined with auto-renewal. It might be month 38 on what you thought was a 36 month agreement, yet there was a liquidated damages clause that you were not aware of. In the above example, you could be on the hook for 22 x $500 = $11,000, even though you had processed for over three years with the same merchant services provider.


At CardChamp, we look out for the small and medium size businesses. We always have your best interest in mind. This is why all of our standard agreements are month-to-month with no penalty to ever cancel.


We also can help you review your current merchant services agreement before you decide to change merchant service provider, even if it is not CardChamp (disclaimer - we do not provide legal advice or services). We know which companies typically include a liquidated damages clause or auto-renewal term in their agreement. Let us know what company you are processing with and we will see if we can help.


On average, CardChamp saves businesses 25% off of their credit card processing fees. Contact CardChamp to find out how much your business can save.

Contact CardChamp


Written by Meredith