by Matt Rej
It’s frustrating for merchants to realize they’re overpaying on credit card processing while they’re in the middle of a contract.
But just because you’re “locked in” to a 36-month contract that still has 12-18+ months remaining, it doesn’t mean you’re forced to continue overpaying until your contract expires.
Waiting it out is a big mistake. And while you may not be able to switch processors, you can still save a ton of money on payment processing by taking action right now.
Common Misconceptions About Credit Card Processing Contracts
Here’s what a lot of merchants make the wrong assumptions about their payment processing terms:
- Your pricing is locked in for the lifetime of the contract.
- You can’t adjust your rates until renewal.
- You have no leverage mid-contract.
- Renewal is the best time to negotiate.
- Processors can change terms but you can’t push back.
None of these are true.
The contract governs the relationship, but it doesn’t control every line item on your statement. Pricing structures and markups aren’t hardcoded into agreements in the way that merchants assume.
What Merchant Processing Contracts Actually Control
What the merchant agreements actually lock down is narrower than what you assume.
Yes, term length is a factor (often 36-48 months) with automatic renewals unless you give written notice 90 days out. Lots of these contracts also have early termination fees and liquidated damages clauses that can easily get into five-figure territory, making you feel locked in.
But what isn’t in there, or at least not in the way merchants assume, is anything stating that your rates are fixed or can’t be touched during the term.
The opposite is actually true. Virtually every standard merchant agreement explicitly gives your processor the right to amend fees with advanced written notice. It’s also the clause that can create an opening for you to re-negotiate.
When Your Processor Changes Terms, Your Options Change Too
When your processor raises rates or adds new fees to your account mid-contract, they’re often triggering a clause that gives you the right to leave without paying an early termination fee.
Read the fine print on your rate increase notice. Most of these include a provision that allows you to reject the new terms within a specified window and cancel penalty-free.
This matters, even if you won’t actually want to exercise that right to terminate.
Because in most cases, it’s not in your best interest to cancel. And more importantly, your processor doesn’t want you to cancel either.
Processors send these rate increase notices out knowing that the vast majority of merchants won’t read them carefully or respond. So when you respond by invoking your right to cancel, it shifts the entire dynamic of the conversation and puts you in the power seat.
You now have an opening to have a direct conversation about your pricing without the threat of an early termination fee hanging over your head. Both you and your processor know that you can walk away, so they’ll be more inclined to make you happy and lower your rates.
What’s Always Negotiable Mid-Contract
Regardless of where you are in your current term, there are always certain elements on the negotiating table. Not all of them can be touched in every situation, but none are off limits just because you’re in the middle of an agreement.
Pricing Model
If you’re currently on a flat-rate or tiered pricing structure, you don’t have to wait until your contract ends to switch to interchange-plus.
Your processor is already paying interchange and assessments to the card networks. So the switch here is just administrative and changes how costs are passed through to your statement.
With flat-rate and tiered models, the network fees are bundled into a rate that’s highly marked up to benefit your processor. Whereas IC+ is more transparent, and offers a clear markup (often smaller) on top of the wholesale rates.
Moving to IC+ mid-contract is more common than most processors let on. But it’s often the single biggest way for merchants to save money on credit card processing.
Read More: Get Interchange-Plus Pricing Without Switching Providers
Processor Markup
Even if you’re already on an interchange-plus contract, the markup sitting on top of the network fees can always be negotiated.
Rates are rarely locked into contracts the way that most merchants assume. Typical merchant agreements give your processor the option to change your rate (which always means increase) at any time with proper notice.
This is a two-way street. If your processor can raise their rates mid-contract, you also have the right to push back against those increases and request reductions at any point.
You’ll have more negotiation leverage here if something changes, like volume. If you went from processing $400k to $900k per month, your processor can still profit from your account even if they cut their markup.
At scale, going from 0.40% + $0.10 per transaction to 0.25% + $0.05 can save you thousands of dollars every single month.
Junk Fees
In addition to the transparent markup on top of each transaction, processors use junk fees to hide margin in other parts of your statement.
This is one of the hardest things for merchants to identify, particularly when their base rates don’t change during a contract term. For example, you may still be paying the agreed-upon rate of 0.10% + $0.10 per transaction. But your effective rate has climbed 50 bps and you can’t figure out why.
You’ll need to audit your statements for new fees that weren’t there previously or existing fees that have increased over time.
Junk fees come in all different shapes and sizes. Sometimes they’re labeled as “compliance” or “risk” fees, and other times disguised as network fees.
Once you’ve identified these extra costs that are purely processor markups, you can negotiate them off of your statements (or at least get them reduced).
Why Your Processor Won’t Bring This Up
Your processor is never going to volunteer this information willingly because it gives them less leverage.
Merchants who believe their pricing is fixed and their contract can’t be changed until the term expires are a dream for processors. Even if they know they’re overpaying, they’ll keep overpaying without pushback if they truly believe nothing can be done about it.
It’s your processor’s best interest to keep you in the dark.
And they’re really good at dismissing your inquiries if you aren’t asking the right questions. Merchants who contact processors without a plan often hear “there’s nothing that can be done” about the rate. They accept this answer, move on, and continue overpaying.
This is just one of the many different tactics that processors use to extract more money from merchants.
Rate increases go out under the assumption that most people won’t read them. Fees get added to statements knowing they won’t be caught for months (if ever). And the perception of airtight contracts with locked-in rates makes merchants feel helpless.
How to Have This Conversation With Your Processor
Reaching out to your processor mid-contract for a better rate is all about preparation. If you go in blind just asking for a reduction, you’ll likely be stonewalled.
Start by carefully auditing your statements. Pull the last 3-6 months and calculate your effective rate (total fees divided by total volume) to use as your baseline.
Processors will take you more seriously when you give them hard numbers as opposed to just saying “I feel like I’m paying too much.” And if you want specific fees removed, identify them by line item names.
It’s also worth knowing that just asking for lower rates might be the wrong conversation if you’re on the wrong pricing structure. Flat-rate accounts seeking rate reductions will enter a conversation about lower flat rate, which is the wrong path. So make sure you get on IC+ if your account isn’t already set up that way.
Expect resistance. You’ll likely hear that your rates are already competitive or that changes aren’t possible mid-contract.
None of this is necessarily true. Come back with facts, including real data on how your rates have changed or provisions of a rate increase notice that allow you to cancel penalty-free.
Working with a merchant consultant here can change the outcome significantly. Processors respond differently when they know the person they’re talking to does this every day. Merchant consultants know what’s negotiable, what’s actually a good rate, and when certain responses are stall tactics or a real limitation.
So if you’re mid-contract and overpaying, waiting is one of the most expensive mistakes you can make. Reach out to our team here at MCC for a free consultation, so you can start saving money immediately without switching providers.