Businesses primarily cancel their merchant account because they no longer need to accept credit cards or because they're switching to a different provider that has offered them lower rates and fees. When an account is canceled because a business no longer needs to accept credit cards, it usually means that the business is being dissolved and there's no reason to have an account at all. However, canceling a merchant account to switch to another provider that promises lower rates may be more trouble than it's worth - literally.
Check with your existing provider before you cancel your merchant account
Accountant
Competition is the driving force behind the high merchant turnover that exists in the payment card industry. Any small business owner can attest to the high frequency at which they're approached by a merchant account salesperson promising the best rates and fees. With so many offers it's tough not to investigate a few, and many business owners do just that. The problem is that they switch to the new account without consulting their existing provider.
Merchant service providers want to retain clients. It's a lot easier for them to keep an existing client than it is to acquire a new one. The same is true from a merchant's point of view. It's a lot easier to have the rates and fees lowered on your existing merchant account than it is to cancel the account and open a new one.
Don't look at the constant flow of new merchant account quotes as an annoyance, instead, view them as a helpful reminder. Each time you're offered merchant account rates that are lower than the rates on your existing account, send them to your provider and request that they match or beat the better quote. Even if you're in a contract, many merchant account providers are willing to lower rates and fees in order to retain your business.
By giving your existing provider a chance to match quotes that you receive, you're getting the benefit of the lower rates without the hassle of canceling your exiting merchant account and opening a new one.
Avoiding cancellation fees when switching merchant accounts
So what happens if your existing provider won't match or beat the rates of a competitor? The first thing to do is determine if you're under contract, and if so, how much the cancellation fee is to close your merchant account. Even if you're looking at a large fee, there are a couple of things that you can do to avoid paying it entirely.
The first is to read the terms of your contract. Most cancellation fees are void if a merchant service provider raises rates or fees within the contract period. If your rates have increased since you originally signed the contract, or since the last time the contact auto-renewed, you may be able to cancel your merchant account without having to pay the fee.
If that fails, try to pass the cancellation fee along to the new provider that's trying to earn your business. Especially if you're processing a decent amount of credit cards each month, it may be worth it for the new provider to pay your way out of your existing account. Believe it or not, this is something that happens on a fairly regular basis. Most providers won't advertise that they'll pay cancellation fees to their competitors, but they will do what they can to get your business if the numbers work for them.
If all else fails...
If you're existing provider is unable or unwilling to meet lower rates and fees promised by a new provider and you can't avoid the cancellation fee, make sure that it's worth it to switch accounts. Crunch the numbers to figure out if the lower rates and fees will save you enough to negate the out-of-pocket expense of the cancellation fee.
Make sure the new rates are truly better
The final and perhaps most important point to cover before switching merchant accounts, is to make sure that the rates and fees promised by a new provider are really better than what you already have. Especially on a tiered pricing structure, merchant account rates aren't always what they appear to be. Read the article, "Merchant Account Rates: Tiered VS. Interchange-Plus Pricing" to get a better understanding of this topic.
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