5 Essential Things To Consider With Credit Card Processing Contracts

5 Essential Things To Consider With Credit Card Processing Contracts

Maybe you’ve decided to take the plunge and make life easier for your business – you’re finally going to accept debit card and credit card transactions!

Or maybe you’re on the hunt for a cheaper deal for your credit card processing.

But before you can breeze through business with a reliable and cost-effective credit card processing system in place, there’s a little paperwork to wade through.

You’re hit with application forms left, right and centre. One for your merchant account. One for your terminal rental. And another for direct debit mandates.

Your new payment processing system no longer seems quite so simple.

“Wasn’t this supposed to be easy?” you ask. “I might just stick to cash-only!”

We know these forms might seem overwhelming at first, but card acceptance is crucial in our cashless society. With our guide, navigating your various credit card processing contracts is easy.


First off – How Does Credit Card Processing Work?

Before you can fully understand how your contracts are set up, it’s important to know how credit card processing even works (Skip to #1 if you’re already clued up!).

When a customer pays a merchant (whether this be via PDQ machine, card reader or virtual terminal), their payment card information is captured and sent to the acquirer bank.

The acquirer then asks the card network for authorisation from the customer’s card issuer bank.

The card network asks for the authorisation and either confirms or denies the payment transaction request. The funds will make their way from the cardholder’s account to the merchant’s bank account, with a small fee taken off by their credit card processing company.


1. Who Do You Need To Set Up Contracts With?

You will typically contract with three individual parties – the terminal supplier, the merchant account supplier, and the payment gateway provider.

The terms of this agreement will vary for each party. Though you might usually skim over those T&Cs, it’s important to check the conditions and time-frames of each contract.

With the merchant account you will always contract with the card scheme member (i.e. the acquiring bank). The contract can normally be terminated within 1-3 months.

For the terminal rental, it’s likely to be the acquiring bank, one of its subsidiaries, or the ISO that you’re contracted with, and the agreement typically lasts much longer. If you’re a sole trader then you’re commonly able to break after 18 months (under the Consumer Credit Act 1974). You are otherwise looking at minimum terms of up to 3 or 4 years, regardless of the service provider.

A Payment Service Provider (PSP), such as PayPal or Stripe, will provide the payment gateway.

who set up contracts with


2. What Fees Are Specified?

As we already mentioned, you must read the fine print on your credit card processing contracts. To avoid costly errors, you need to know how much money you’re agreeing to part with on a regular basis, as well as hidden extra costs.

There are typically 3 types of card processing fees outlined in your contracts: transactional, scheduled, and incidental.

The transaction fees are the standard fees you pay to process each individual contract. You should pay attention to the figure you’re agreeing to and compare it to other providers before setting anything in stone.

Scheduled fees are “flat” fees. These are charged regularly, like your monthly or annual service fee, payment gateway fee, and fees for statements.

Incidental fees are charged as and when required, like in the case of a chargeback or if your system does not meet PCI DSS compliance (Payment Card Industry Data Security Standards) regulatory practices, which you must adhere to by law.

credit card processing contract fees

3. What Are The Minimum Terminal Rental Terms?

If you’re still at the stage of browsing terminal rentals, you’re probably wondering what contract length to commit to.

For first time card processing users, it’s tempting to consider the lesser minimum terms of 1-2 years. When you’re unsure if it’s going to be used long term, you likely don’t want to be tied into longer deals and payments.

However it should be noted that the monthly fee for short contracts is often significantly higher.

Conversely, when looking at more extensive contracts of 3 years plus, suppliers are usually happy to offer discounted pricing for the longer commitment.

Some suppliers also offer no tie deals, however this results in increased costs elsewhere that might not be immediately evident.

minimum terminal rental terms


4. What To Do After Your Minimum Term Expires?

If everything goes well, and you find yourself at the end of your minimum term, most suppliers will place you on a rolling contract that allows you to terminate at short notice.

Though this is typically around 30-90 days, some suppliers do restrict the period on which you can give notice.

We always recommend reading carefully at this point, as missing the date to hand over your written notice can result in paying a 1 or 2 year termination fee.

To avoid paying this, you might even have to wait another year or two before you’re able to terminate without cost.

what to do when contract ends

5. Terminating Before The End Of The Minimum Period

However things don’t always go according to plan.

Say you’re a small business owner and after a short run with your card processing terminal, you decide to go in a different direction with your business. Whether your terminal accepts Visa or Mastercard is the last thing on your mind, and you no longer need your terminal as a card payment method. You’re all ready to set off on your latest project, but you’ve got months left on your terminal contract.

The good news is that, in most cases, you can cancel your contract.

Unfortunately, cancellation comes with its drawbacks. If you’ve got a lengthy period of time left on your contract, you’re likely to be lumped with an early termination fee

Depending on the remaining time in your minimum term, the fee is usually at least the terminal rental cost for this time, with some suppliers even charging additional fees on top.

terminating contract early

Getting Help With Your Contracts

If you’re still feeling apprehensive about completing your merchant agreement and other contract forms, there’s no need to stress.

When you know what to look for, you can save yourself time, money, and stress in the long-run. No signing up for dodgy deals that lock you in for years at sky high prices. You can shop savvy.

When it comes to committing, nowadays, almost all suppliers are happy to complete the forms on your behalf over the phone, simply asking you for the relevant details. Moving swiftly through sections that don’t relate to you or your business, these tricky forms can be completed in as little as ten minutes.

All you have to do is have the necessary info at hand, then sit back and relax while you wait for them to forward you the final product to sign.


Get In Touch!

If you still haven’t decided on your merchant service or payment processing service, or you’re just looking for a cheaper deal, CardSwitcher is here to help you out.

Take a look at how it works, then head over to our Card Processing Fee Comparison to reduce your credit card processing fees by up to 40%!


Want to Save 40% on your Card Processing?

Provide a few quick facts about your business & see how much you could save

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5 Responses to “5 Essential Things To Consider With Credit Card Processing Contracts”

  1. John Talbot

    Hi i am with first data and have a clover mini
    i am a sole trader just spoke to them and they say no getting out at 18 months from my contract and if i do they will cancel today for £800.
    is this right i get more inactivity charges than i earn and it takes them 6 days to put the payments through to my bank when i do
    and we were never left a contract

    • Cardswitcher.co.uk

      Sole traders are covered by the Consumer Credit Act 1974 (“CCA74”) so ask First Data why they believe you are not covered by that. As we’ve said before on our blog, some providers structure rental contracts as “membership agreements” to circumvent CCA74 and more recently others (noteably HandePay) have been using some of the more obscure exemptions to argue that the CCA74 18 monthrule doesn’t apply. I’m not aware of First Data doing either of these so assuming your contract is a rental contract and you are a sole trader then CCA74 should apply.

      Secondly, CCA74 only gets you out of “rental payments” after the 18 month period. Other fees such as “re-stocking fees” are not covered by CCA74 and would still be payable. So ask First Data what makes up the £800. First Data do charge a re-stocking fee of £195 on normal terminals so I would expect there to be some fee on Clover that you can’t avoid by early termination, but whether this is what the entire £800 relates to, I don’t know.

  2. Piotr Herman

    Hi, I signed an agreement with Card Saver ltd. on 9/03/18. I’ve been caught on phone by one of they independent brokers. He promised me that will be 5y contract and I can leave after 12mnths, describing this one of best providers, deals etc etc.. I said Ok, lets go ahead, then the Card Saver rep gave me a call, asking for my details and after couple of minutes she sent E-contract to my emailbox. This happened so quick that I didn’t have time to read it properly. I never had such experience before I’m just a chef, cooker rather than a law specialist. Anyway few days later when I’ve had time to go deeper with terms of contract. I realised that this is a trap! 5 years contract as a minimum term, really hefty a terminal rental fees, processing fees are much higher than competitors. As will be opening my small cafe in May or June I asked them to start charging me from beginning of May. I gave a ring to customer service and I’ve been told that: ‘Sir, you signed an agreement and is too late for any changes, also we didn’t make you any promises as the broker who you to spoke to is an independent advisor 🙂 Next day on 13th of March (4 days after signing) I sent them Cancellation Notice by email and ‘sign for’ post. Now they threatening me as I signed a valid agreement and I have no choice like to pay a penalty fee about 35 pound x 60mnths = 2000 pounds!
    The things is they don’t even start this service, I have no terminal etc.
    I’m a sole trader (just me, no employees) and I’m just starting my business and suddenly this kind of surprise…. 🙁
    Could anyone help me please???
    sorry for many mistakes in english grammar 🙂


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