How to avoid early termination charges on card machines

How to avoid early termination charges on card machines

The internet is flooded with stories of sky-high charges for early termination of card terminals. In one account I read, a merchant was charged more than £700 to exit an agreement after the minimum cancellation term had elapsed.

With so many merchants paying excessive termination fees, I thought it was time to lift the lid on cancellations and reveal how you can avoid hefty charges.

In this article, I’ll cover:

Let’s get started!


What will I have to pay?

If you want to cancel your card machine contract early, you’ll usually have to pay an early termination fee. Essentially, this is an extra fee that kicks in to ensure your card processor makes back their capital investment from buying the terminal in the first place.

Exactly how much you pay will depend on the specific wording of your contract. However, when we reviewed popular contracts, we found some fees were significantly more common than others.

Here are two very common charges you should watch out for.

  • Monthly rental fees for all remaining months of the minimum rental period
  • Restocking fee

So, how much will that actually cost you?

Let’s say you bought into a four-year contract at £15 per month. Eighteen months into your program, you decide you want to quit.

First, you’ve got 30 months left so that costs you 30 times your monthly instalment, which works out at £450.

Second, you’ve got your restocking fee, which can typically be around £190.

All in, you’re looking at an early termination charge of £640.

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Does the Consumer Credit Act 1974 cover card machine contracts?

If you’ve read anything about card machines, you’ve probably heard of the Consumer Credit Act 1974 (CCA).

However, considering the CCA is 67,000 words long, I really don’t expect you to have read it cover to cover, especially since only a very small section is relevant to card machine contracts.

Cutting a long story short, the CCA can allow businesses run as sole traders or partnerships to exit a hire agreement after 18 months without making further rental payments. (Note: You will still be liable for non-rental charges like re-stocking fees.)

Unfortunately, the CCA leaves legislative gaps that some suppliers are actively trying to exploit.

You see, the CCA only refers to hire agreements. It says you can exit a hire agreement at any time after 19 months without making more payments.

Some providers are dodging this get out clause by structuring their terminal rental agreement as memberships. As memberships are different from hire agreements, they aren’t covered by the CCA.

If you exit a card machine membership after 18 months, you may still have to make extra payments.

Also, over the last few years, there have been instances of suppliers — notably Merchant Rentals plc, the terminal hire partner of Handepay — using the obscure clause 101(7)(ii) to circumvent the CCA 1974. The clause states:

(ii)the goods are selected by the hirer, and acquired by the owner for the purposes of the agreement at the request of the hirer from any person other than the owner’s associate, or

This clause dis-applies the 18-month rule where the goods are “selected by you and acquired by us from any person”.

Technically, this does describe the terminal fulfilment process since all terminal suppliers obtain their terminal stock from a third-party manufacturer, normally Ingenico or Spire. Strictly, this loophole could be used by any terminal supplier (or any other equipment supplier) who has not manufactured the equipment.

So why isn’t it?

Well, our understanding is that this is not the intent of this clause. The clause is designed to protect lessors where the leased equipment is bespoke or designed specifically for the customer and could not easily be re-leased to another customer.

It is not intended for a scenario where the equipment is commoditised and could be used by just about any customer, as is the case for card terminals.

However, companies do use clause 101(7)(ii) so it is important to keep an eye out. Here is one letter a reader sent us from Merchant Rentals Ltd that utilises the clause I just mentioned.

An example of a company using clause 101(7)(ii) to circumvent the Acte words hire and membership.

Also, ask your supplier directly and keep asking until you get a definitive answer in writing that 1) the CCA does apply and 2) that clause 101(7) does not apply.

And if your business isn’t run as either a sole trader or partnership, you aren’t covered by the CCA because you aren’t classified as a consumer.


How do I cancel my contract?

It’s important to realise that minimum terms exist for a reason. After all, your supplier is footing all the capital costs for your payment system, paying for the card machine, installation and so on.

Realistically, they only start to make a profit towards the end of each contract.

However, once you’ve passed the minimum term and your supplier has made a tidy return, shouldn’t you be able to go your separate ways? It certainly sounds reasonable.

With most providers, you can give notice and part ways amicably.

Simply put your request in writing and send it to your partner.

But wait!

Before you fire off your cancellation request, remember to check your agreement for details on the specific cancellation process. As you’re about to see, some suppliers make it harder than it needs to be to cancel your contracts.


Dodgy termination conditions

Some providers structure their termination process to ‘trap’ merchants in agreements that they don’t want to be in.

Although there are many different ways for suppliers to artificially extend your contract, most dodgy suppliers will use one of two tactics.

  • First, automatic minimum term rollovers. All card machine agreements will have minimum terms included in the deal. However, with some agreements, a second minimum term will automatically kick in once you’ve passed the first. The second term acts just like the first with early termination penalties and all.
  • Second, narrow cancellation windows. This one’s a bit more obscure. Essentially, to get out of these agreements you have to serve your notice of termination within a small window. In the worst cases, that window is 12 months before the end of the original term! If you miss the cancellation window, your agreement rolls automatically renews, locking you into a new term.


What else should I look out for?

Beyond the termination conditions, some suppliers have a whole host of onerous conditions to trip you up. In this section, I’ll discuss some of the most common conditions.

  • Written and recorded. Ensure your cancellation notice is put in writing and sent by recorded delivery. This ensures that you have a record that the supplier received your cancellation notice and the date of receipt.
  • Addressing your cancellation letter to the wrong company. Merchants will often buy card machine contracts through a reseller. When it comes time to cancel, you have to address your letter to the provider and not the reseller. If you address it to the reseller (and many merchants do), the supplier will probably ignore it. Handepay is a classic example as their terminal hire is undertaken by Merchant Rentals plc.
  • Misselling the card machine package. We often hear complaints from merchants that a salesperson told or promised them something that wasn’t actually included in the contract they signed.
  • Read all contracts before you sign them. Make the salesperson specifically point out where in the contract where it states their verbal representations. While some salespeople deliberately mislead, others do it accidentally because they are not familiar with their own contracts. Either way, it’s always important to compare verbal promises with contractual offerings.


Have you experienced any of the above?

If you have had trouble cancelling a merchant service agreement, let us know about it in the comments. It’s important to highlight unfair policies in the industry and we can’t do that unless you help us spot them.

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21 Responses to “How to avoid early termination charges on card machines”

  1. 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 is 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 thing is they don’t even start this service, I have no terminal. I’m not going to leave it without clarification. If it will be needed I’m willing to go to the Court and publish my case on as many as I can websites, social media.
    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??? Maybe I can use The Consumer Credit Act 1974 or the other act?
    sorry for grammar mistakes


      Piotr – sorry to hear of your problems. Theres a few points to consider but I’m afraid theres no easy way out of this. As I understand it, theres no “cooling off” period for business contracts so you are bound by the terms of the contract. You could try embarrassing Card Save into terminating the contract at no cost through widespread social media posts telling your story (be sure to include Trust Pilot and UK Business Forums) – not sure this will work but may force a more positive dialogue. Your allegation of mis-selling is quite common amongst the complaints levelled at Card Save on Trust Pilot, however I’m guessing that this mis-selling was done verbally and you have no hard evidence of it ? Their distancing of themselves from their broker is also not positive for their reputation and again something to emphasise as you tell your story.

      Its a bit of a pity that you have submitted a Cancellation Notice as I’m afraid all this has done is trigger the excessive termination costs. Had you not triggered the Cancellation Notice then as a sole trader you could potentially have cancelled the contract after 18 months under the Consumer Credit Act 1974 which would have left you liable for no further terminal rental charges after the initial 18 months (you would still have had to pay the £120 fee). If you havn’t had the terminal yet and delivery is beyond the time frame in the contract you could potentially rescind the contract on the basis of non-performance by Card Save but given its now only 8 days after you signed the contract then that doesn’t feel a sufficient time period has passed? It does feel overly punitive to hold you to a full termination cost for a terminal that hasn’t yet been delivered.

      You could just dig in and refuse to pay the fees then go to court. Generally speaking I think Card Save will probably take you to court – on the face of it they would win – they have a valid contract which you have chosen to terminate. However the judge may take into account that the contract was terminated shortly after signature on the basis of alleged mis-selling and may still find in their favour but with much lower damages than £2,000. Going to court can be time consuming, costly and stressful and if you can “cut a deal” beforehand then this could be advantageous.

      I’m sorry theres no easy answer for the situation you find yourself in. For other readers, the moral of the story is always read the contract before signature and ensure that any verbal representations from the sales person are contained within the written contract.

      • Piotr Herman

        Hi, thank you for a reply and describing this problem. Unfortunately, as I was very angry and furious I sent them the cancellation notice on Tuesday 20/03. Their reaction was really quick – they ignored my Notice and on Wednesday they’ve accepted my application which I signed on Friday 9/03. Then on Thursday despite the cancellation they dispatched a terminal which was delivered on Friday to neighbours. This is strange especially that yesterday one of their reps called me and he admitted that it shouldn’t be a terminal delivered to me as we agreed the start of service at beginning of May. During this conversation I tried to negotiate terms and conditions of my contract, however he said that this is not his role, because I’m bounded by signing. He’s just checking if Card Saver rep has made any mistakes during persuading me to sign a contract.
        Can you also advised me if it is possible that the judge will take into consideration that their prices, charges are hefty, unexcused (misleading customers) when you compare to the other card processing providers.
        Eg. I recently received a quote : min. term 12mnts!!!, terminal rental £20 per month, debit card rate 0.4%, credit card rate 0.7%.
        on the other hand Card Saver: min. term 60mnths!!!, terminal rental £30 per month, debit card rate 0.7%, credit card rate 1.2%
        This is absolutely wrong and something has to be done!!! Especially they lie that this the best deal on market.
        I’ll be keeping you inform how this case ended up.

  2. Dulce Jones

    Since i signed a contract I have been overcharhed on my terminal rental and what i agreed to..I have raised this numerous times with the provider and 2 years in I am still being overcharged with no resolution being offered. I am a sole trader and wondered if i can get out of the contract because of this?


      I’m no lawyer, but our view would be….
      If you have been overcharged, you have notified them of the over-charge on multiple occasions and they have ignored your complaint then it sounds like they are in breach of contract and you do have grounds for termination (in order to prevent an ongoing over-charge). They will undoubtedly challenge this and test your resolve so do double check whats written in your contract re the over-charge and do keep records of the numerous times you’ve advised the supplier of the over-charge. I am surprised that the y have not remedied the over-charge.

  3. Susan Luff

    HI there,
    I took out an agreement with a card service provider in October 2015. I have just closed my business and no longer need their services – when i tried to close the account they told me i would have to pay a total of £969.18 for early termination fees.
    This seems very steep to me??


      Hi Susan – It very much depends as to whats in the contract. Typically, if you terminate before the end of the minimum term, you end up paying the remaining rentals due for the minimum term and in addition with some providers there is also an admin or re-stocking fee – for example First Data charge £195, Payment Sense charge £100. As a worked example, you are 32 months into your minimum term. Assuming you signed a 4 year deal, then you have 16 months remaining. If your monthly terminal rental was £15 + VAT then your termination fee would be £288 (16 x £15 x 1.2). Thats a long way short of £969.18 but you can see how the calculation works and can flex it for your specifics.

  4. Samantha Forrest

    Hi, I took out an agreement back in November 2015 and it was agreed that if my husband also signed up, the agent would make sure that we would only have to sign up for 2 years due to the financial climate at that time. What we weren’t told at that time was that we were actually signing into a 4 year contract and that two separate payments would be taken from our bank accounts. In March this year I was telephoned by a lady advising that the company was being taken over and I would need to re-sign a document so that my signature was on their records. I was led to believe that this was for data protection purposes and had no reason to disbelieve this. I also gave her my husband’s details to ensure that she could get his signature for their records. It was at this time that I was advised how long the original contract term was for. I told her I was extremely annoyed about this as even though I hadn’t looked for a new supplier, I felt that I was free to move as and when I was ready. She apologised and advised that the contract would end at the four year point and that there was nothing she could do about it. My accountant has now advised me that he believes I have been signed into a new agreement. Having looked at the signed document again, it states that the minimum term is 24 months from the date of the first payment as shown below, however, there is no date. The company do not respond to my emails and where I signed a document with them, another business owner in my town has advised that it is actually a separate company I should be contacting. I have tried phoning them on numerous occasions, but after a few rings it keeps cutting off. I now feel that I have been deceived twice and feel that I shouldn’t be held in a contract that was originally agreed at a 2 year term. This same business owner was the one that had recommended me to the agent and is now in the same position as me as she was told that she would be signed up for 2 years and has now been told that it was 4. However, she did not receive a call from the lady to sign a new document due to the company changing hands. Companies like these should be ashamed of the way that their agents are signing unsuspecting people into contracts.


      Samantha – I am terribly sorry to hear of your troubles. Whilst this is of little consolation in your case, your story does emphasise the need to read any business document you are being asked to sign and ensure the written terms concur with those verbal assurances that you are given. Unfortunately, sales people do lie – not the majority of them, but a few bad apples. But unless you can prove you were fraudulently conned into signing something then I’m afraid the signed contract will stand, irrespective of what a sales person may have said. With terminal hire contracts, the things to look out for are 1) MINIMUM CONTRACT TERM, 2) TERMINATION FEES, 3) HOW AND WHEN A TERMINATION NOTICE CAN BE SUBMITTED and 4) WHICH PARTY ARE YOU CONTRACTING WITH.

  5. Dale Shirt

    I’ve been hit with a bill for over £500 for cancelling a card machine contract. I’m hoping to find a way of not paying as it’s been nearly 18 months and I’m a sole trader. Any advice please

    • Stephen Hart

      Dale – the date is key, if the contract is over 18 months then there are ways out under the CCA 74 as described in our blog. Unfortunately if you terminated before 18 months then CCA 74 doesn’t apply. Unless there was evidential “poor service” on their part that was the reason for your termination (and you can prove that) then this is a tricky one. Some people try ignoring the demands and not paying but most card providers these days will aggressively pursue – you may be able to cut a deal at less than full price, but no guarantee. Apologies, not what you want to hear!!


      Dale – the date is key, if the contract is over 18 months then there are ways out under the CCA 74 as described in our blog. Unfortunately if you terminated before 18 months then CCA 74 doesn’t apply. Unless there was evidential “poor service” on their part that was the reason for your termination (and you can prove that) then this is a tricky one. Some people try ignoring the demands and not paying but most card providers these days will aggressively pursue – you may be able to cut a deal at less than full price, but no guarantee. Apologies, not what you want to hear!!

    • Mikey

      Hi my wife has recently been cold called and duped into signing up for a card machine from “Payment Sense”.

      She doesn’t have a telephone line or WiFi access which she told the sales person and was provided with a mobile type device with a SIM card.

      Long story short the new machine failed to work 99.9% of the time and after 2-3 weeks she asked to cancel the contract.

      They have said she only had a 14 day period in which to cancel free of charge and now she has been told it’ll cost her around £640 to get out of the contract.

      She also argued that the device never worked and she was effectively provided with a machine that wasn’t fit for purpose.

      They have refused to allow her to cancel free of charge and we are now just about to contact the Ombudsman service to see what they can do.

      Can you please give us some advice on what else we could do or are we in a no win situation.



  6. Jenny

    I changed my card supplier a few years ago and was assured by the new provider that they would be no problem in changing from my old provider to them and that this particular guy would sort all of that out . Maybe I was too trusting and naive but hence to say I later realised I was paying for 2 card terminals and could then not get out of either contract . I have attempted at various stages to cancel my original contract and partly down to me not being efficient enough it had rolled over to a new contract .2 weeks ago I sent in a letter informing them I would like to cancel and got a letter back saying I owed £752 to get out of this contract . That I sent only valid till December. I then got a call back from them today offering on this occasion to reduce by 50%. Do I take that offer as it’s only if I pay within 14 days or do I risk paying more if I refuse in the long run . I’m a sole trader


      Jenny – difficult to advise without chapter & verse. However – if the contract is legally “sound” and theres no instances of the provider’s “non-performance” (giving you a basis for termination) then sounds like a 50% discount isn’t a bad compromise. Unfortunately yours is another good example of the benefits of understanding the contract’s termination provisions and deadlines. Sorry to remind you but had you terminated before the original contract had “rolled” then you could probably have exited at no cost.

  7. Burhan

    First Data are trying to charge me over a £1000 pound in fees due to terminating.

    I stated that in the contract it says I have to pay till 18 months to which I agree ( I put my notice to terminate on month 14).

    They have got back to me stating because I am a company, I am liable to pay the whole amount up until the 48 month contract. The company has now closed and ceased trading I want to know what rights I have. Do I need to even pay considering we have ceased trading? Will this have an effect personally in regards to credit rating etc. On the contract I signed it does not state anything regarding LTD companies being liable to pay until the end of the contract? Therefore am I still bound to pay and agree by their comments? Your advise is much appreciated.



      HI Burhan. If I understand correctly, this 18 month window is the period under the Consumer Credit Act 1974 that an individual could terminate a lease agreement without paying further lease charges. However it doesnt cover companies so if its a company that contracted with First Data then that company would be liable for the lease term, ie 48 months. If the company has ceased trading then First Data simply become an unsecured creditor of the company which would be dealt with by the administrator/liquidator or whoever is managing the winding up of the company in the same way any other creditors are being dealt with. Will this affect your personal credit rating? – I’m unsure – I guess it could to the extent you are a director of a bankrupt company.

      • Burhan

        Thanks for your reply. Yes this is what they have said. However it doesn’t state this in the contract. Am I still contractually obligied even though the paper contract does not state this?

        Furthermore, we closed our business not because of debt but due to retirement and paid all bills up to this date. However, what we do not want to pay is this bill as it seems excessive and I just wanted to know that if we did decide to go through this route what the implication would be on us financially. A lot of people say all creditors not paid dies when the business does. Therefore the creditor has to take the hit. Our business didn’t die, but closed down with every bill and termination fee paid for apart from the First Data Bill.



          Double check your contract – I have never seen a terminal contract that didnt note the termination provisions. Re your business – we are getting into insolvency law which isnt my area of expertise – maybe worth you speaking with an insolvency practicioner – depends on how your company has been formally wound up.

  8. Samantha Trimble

    Some of these companies are an absolute disgrace. I joined Paymentsense back in November. As I have switched a couple of times before, I was very wary of the sales tactics they all use. Well this has turned out to be the worst one yet. Sales rep told me all sorts of lies, changed the password on my mew terminal without my knowledge (I had to go through the stress of getting the machine reset as rep was ignoring my calls), he registered me as a totally different business name which means my clients are phoning me to ask why this other business name is on their bank statements. Paymentsense have yet to rectify this problem. Rep told me he would cancel my old contract on my behalf and I wouldn’t have to do anything. Turns out I had to do it all myself, had to pay £520 termination fees to my previous supplier and and still waiting for Paymentsense to reimburse me, so far 2 emails have been ignored. Absolutely sickens me that these people treat small businesses this way. I am a sole trader. Also the transaction fees they are charging are ridiculous. The rep said I would be saving £20 month but no, I am now paying about £30 MORE per month. I have lost sleep over this, totally disgusted.


      Samantha – sorry to hear of your woes. Some thoughts – to the extent PaymentSense are not delivering on their written contract then do write to them notifying them of the areas they are in breach of contract giving them an opportunity to rectify. To the extent they do not this may give you an opportunity to terminate the contract and pursue them for costs. The key here is document any breaches and notify them in writing. With respect to the other areas you feel arnt in line with your understanding (eg fees) check your contract and make sure what is being charged is in line with your contract. I make this point frequently to merchants but it is absolutely critical when signing a contract that you do read it and make sure that those verbal assurances from sales people are actually written into the contract – frequently they arnt and you should never sign on the basis of a verbal assurance. Get it in writing!! I hope things work out – next time you switch, give our website a go!


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