What to Know About Switching Merchant Services

Every business wants to save money on credit card processing. So if you feel like you’re paying high rates and there’s room to cut costs, switching merchant services providers may sound like a viable option. 

However, switching merchant services is rarely a good idea—and it often costs more than sticking with your current provider. 

There are several things you need to know before you switch merchant service providers, which is why we created this guide. Read on to find out if switching makes sense for your business.

What Happens When You Switch Merchant Services Providers

On the surface, it may appear as though one credit card processor is offering a lower rate than your current provider. But once you dig a little deeper, it becomes clear that those numbers aren’t always accurate.

Here’s what you need to consider before you switch providers:

Expect Your Rates to Rise

When switching credit card processors, the sales rep at a different company will always try to undercut your current provider. But those costs are often marginal, sometimes just beating your current rates by $0.05 or $0.10 per transaction or 0.025%.

While these numbers can add up to thousands of dollars a year, the savings will be short-lived. Most credit card processing companies offer three or six-month introductory rates to get new customers. After that, the fees will start to increase.

Your new provider may ultimately end up charging you more than you’re paying right now.

Consider Your Integrated Systems

You might already have an integrated payment system that’s been customized for your business. This is common for ecommerce shops, medical offices, restaurants, and other industries. 

If you switch processors, you may need to reconfigure your entire system. This means getting a new backend kitchen display or reconfiguring your inventory tracking system. The downtime associated with this re-configuration and the investment required to switch likely won’t be worth the time and dollars.

It’s almost always cheaper and more cost-effective to keep your existing configuration and integrated system. 

Evaluate Your Hardware and Technology

Switching merchant service providers may also force you to change your hardware systems and processing equipment. Depending on your business size, this type of change could cost you an additional $20,000 upfront. 

Let’s say you’re a multi-location restaurant. Imagine having to change all of your hardware at each location. Not to mention the cost associated with re-training your staff and the opportunity cost associated with mistakes using the system.

Avoid Early Termination Fees and Liquidated Damages

It’s common for processors to include fine print in contracts to discourage merchants from switching providers. These commonly come in the form of early termination fees or liquidated damages.

Early termination fees are fairly straightforward. If you’re still under contract, you pay a fixed rate to cancel—such as $500. While losing $500 obviously isn’t ideal, it can be justified if you’re saving a ton of money by switching (although this isn’t always the case).

Liquidated damages are far more cumbersome. With a liquidated damages clause, your merchant services provider takes the average processing fees you pay each month and then multiplies it by the remaining months on your contract. This can end up costing you tens of thousands of dollars to opt out, which isn’t realistic for most businesses.

Be Aware of Deceptive Sales Tactics

Credit card processors are notoriously deceptive when selling merchant services to businesses. This is one of those situations where it’s typically better to go with the devil you know compared to the devil you don’t. 

If a sales rep knows that you’re thinking about switching, they’re going to promise you the moon as your new provider. But they bury all types of contingencies and complex terms in your contract so they have the option to increase your rates without notice and start adding fees to your monthly statements. 

Remember this when you’re shopping around—if it sounds too good to be true, it probably is. 

Why It’s Better to Keep Your Existing Merchant Service Provider

Your current processor does not want to lose your account. They’d rather make a little less money on you as opposed to losing your business altogether. 

This means that they’ll be open to lowering your rates if you know how to ask. 

Most businesses just accept their credit card processing statements as truth without second-guessing or questioning the fees. But in reality, the vast majority of charges on your bill each month can be negotiated. 

Here’s why it’s better to keep your current provider:

• You can negotiate your rates to save thousands
• There’s no need to lose your integrated system
• You won’t have to buy new hardware or re-train your staff
• Your processor will be willing to make concessions to avoid losing your business
• It’s cheaper in the short run and long term to keep your current provider

If you call your processor and ask for lower rates, they might tell you that you’re already getting the best deal. Continue to push back and negotiate. If that doesn’t work, reach out to our team here at Merchant Cost Consulting.

We can evaluate your current rates and let you know if it makes sense to keep your current provider or if you should consider switching. Then we can negotiate your rates on your behalf directly with your existing processor. 

You’ll be able to save money on credit card processing—without switching processors or lifting a finger. 

Final Thoughts: Does it Make Sense to Switch Merchant Services Providers?

Switching merchant service providers is rarely a good decision. 

The initial allure of a lower rate usually turns to a higher rate than you’re currently paying within the first 12 months of switching. You also have to consider the costs of equipment, technology, and integrated systems that must be changed as well. 

Before you switch, make sure to contact our team here at MCC for a free audit and analysis. We’ll let you know how much you can save without switching providers.