How to Negotiate Your Payment Processing Agreement – Like a Pro!

Renegotiating your merchant account’s contract terms feels amazing – when it’s done right.

You bargain for a good price, while establishing friendly terms and ensuring that there is an efficient, non-costly way out, if necessary.

If you have a merchant account and are processing payments, you have already entered into a contract with a payment provider.

If you’re waiting until your current agreement expires in order to get better rates and terms, you should be aware that all payment processors have auto-renewal terms in their clauses.

Before we present you with our five tactics for renegotiating your contract with your payment provider, we would like to point out two things:

  1. You can renegotiate your contracts terms for a better price during your existing term
  2. You don’t have to wait and ride out the existing terms of your current contract, because there is always a way out and an opportunity to build more leverage for your business.

With that said, here are five contract re-negotiating tactics to help you get better rates and increase your revenues.

Makes sure you understand these five tactics before you approach a potential or existing payment provider.

Understanding your rights, as well as industry loopholes and typical terms, will ensure that your business ends up with the most favorable contract.

Tactic #1 – Understand the Code of Conduct

Take the time to review the Credit and Debit Code of Conduct.

This will help you understand your rights as a business, and is essential to creating leverage when negotiating with your payment provider.

The good news is the government designed this Code of Conduct as a form of protection for your business, so that payment providers don’t take advantage of your business, or confuse you with complex industry practices.

The Credit and Debit Code of Conduct will help you understand the following, as well as other important topics:

  • Cardholder rights
  • Price increases to your account
  • Contract and pricing transparency
  • Rules about contract extension.

This code is a must-read.

Understanding the principles of the Code of Conduct will boost your confidence in negotiating your contract with your payment provider.

All payment providers must follow this code; failing to do so can lead to significant fines.

If you catch your payment provider violating any element of the code, you have great leverage in negotiating the best deal possible.

Be aware, and know your rights!

Tactic #2 – Read the Payment Provider’s Contract and Understand Industry Norms

Understanding your payment provider’s contract seems like a basic tactic, yet most people don’t have the proper context to fully do so, or worse—they think it has no significance or impact.

Here are three core items to focus on:

1.Term and Termination

Most standard terms are for 3 years, with a 90-day notice prior to the end of the contract. With most payment providers, this term is negotiable.

We suggest asking for a 2-year agreement, with a fixed cancellation fee that is clearly outlined; this way, if you don’t like your provider, you can exit without incurring a major penalty.

It is also important to be aware of your renewal term, because if your term renews, you may be “stuck” with your provider once again. However, if you have a fixed cancellation fee, this is something you don’t have to worry about.

There are some legacy agreements that have 2-5 year initial terms, with 2-5 year renewals.

As per the new Code of Conduct, the renewal term should be only 6 months.

If you come across a shockingly low quote that is properly structured and professionally vetted, we encourage you to negotiate a longer term, but always secure a way out of the contract.

Also, make sure you understand all the terms of a low quote.

Remember: MyWatchmen has 10 years of expertise and industry knowledge.

If you need help understanding what exactly you’re agreeing to, and what it is your signing, we’ve got your back. Simply schedule a time to talk with us.

2. Cancellation Fee

Each provider has a cancellation fee associated with the contract you sign when opening a merchant account.

It’s either a fixed fee in the range of $195-$500 per account, or relates to liquidation damages.

A fixed fee is straightforward and easy to understand; it’s the costs associated with liquidation damages that can be worrisome.

Liquidation damages are defined as the fees above interchange rates, multiplied by the remainder of the term on your contract.

Since this can result in a large cancellation fee; a business may refrain from cancelling its agreement due to the excessive related fee, which can be in the tens of thousands of dollars!

In practice, most major payment providers include this clause in their contract, yet never exercise it.

Instead, they simply use it as a threatening tactic.

Over the past 10 years, we have not encountered any major provider following through with this type of penalty.

Think about it: How upset would you be if your payment provider charged you $35,000 to cancel the payment processing contract?

It would certainly translate into bad press for your business and you would likely never give them the opportunity to process your payments again.

The payment provider certainly doesn’t want that!

If you do cancel your contract, it is important to return the equipment you received from the payment provider, and pay the processing and terminal rental fees you owe them for the month.

Failing to do will result in charges for the equipment and related fees.

We believe it’s reasonable to pay a fixed cancellation fee when ending a relationship (vs. cancellation fees per account) with a payment provider.

A $250 cancellation fee is reasonable for small accounts, while $500 is reasonable for major accounts – per company, not per account.

When you negotiate with your payment provider and have liquidation damages in your contract, a fixed cancellation fee can always be negotiated – providing you negotiate well enough.

If you have trouble, don’t fully understand the context or the implications of cancellation, or don’t have the time to do this on your own, call MyWatchmen.

We understand the industry, and we have your back.

3. Read the Full Contract

Unfortunately, payment provider contracts are usually quite lengthy.

Payment providers sometimes issues a “short version” of their agreement, which will often include hyperlinks to websites containing 10-70 additional pages, so be aware.

Always ask for the full version of the contract, and review all hyperlinks.

Hyperlinks are great places to hide specific terms, considering most businesses overlook them!

When you read the contract in full, you should understand how it works.

Ask the rep’s legal department to explain each clause you don’t understand.

It’s good practice not to rely only on the rep’s explanation, as they may not fully explain the negative implications to you and your business.

The payment provider will certainly explain what all clauses mean—if you insist, and if they want to get the deal done.

Tactic #3 – Most Payment Providers Match Terms

If you receive a proposal from a payment provider offering you the best term, but not the best price, this gives your business leverage when discussing your contract with other providers or your existing one.

Most payment providers will match the terms others propose.

Having an excellent offer of term from one or two providers will certainly increase your leverage, resulting in a better contract with the payment provider you plan to sign with.

Tactic #4 – Take Your Time

We certainly understand that everyone is busy. But you should ensure that you take the appropriate time to get your contract right.

The payment provider will be handling credit card revenue, which comes through your business (it’s your money!), so make sure the transactions are being handled correctly and efficiently.

Don’t let sales agents talk you into signing an agreement if you’re not ready to proceed.

If they want your business, make them earn it!

Develop a relationship with the agent, and ask for explanations to everything involved in signing a new agreement.

Once you fully understand all aspects of the agreement, you can proceed.

It’s okay to play hardball; payment providers are used to it, and they want your business.

Tactic #5 – Get Professional Help

Do you really have the time it takes to get the best payment processing agreement?

This process involves a lot of back-and-forth if you want to get the job done right.

If you have the time to invest in this process, your business will benefit.

But if you want to get it done quickly, without going through the details, you will most likely miss something; this can end up costing you money, or trapping you in an unfavorable agreement.

MyWatchmen can certainly help.

We know the payments landscape inside & out, and know the differences among the providers, and the terms they end up offering.

Why not streamline this process? Isn’t your time valuable?

At MyWatchmen, our job is to increase your bottom line.

Next Steps

Now that you are aware of these five time-proven tactics to renegotiate your contact with your payment provider, if you don’t have the time to implement them, let’s carve out some time to talk.

We keep our calls short: to 15 minutes. Simply click here to learn how we can help you, and set up a call.

If you implement these tactics yourself, be prepared for push back. Nothing great comes easy.

If tough negotiations are not for you, let us know, and we will speak with your provider on your behalf.

At MyWatchmen, we’ve got your back.

And if we can’t increase your bottom line, you pay nothing.

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