Progressive Payment Solutions

How To Negotiate A Merchant Agreement For Your Small Business

Negotiate A Merchant Agreement

We’ll show you how to understand and successfully negotiate a merchant agreement to get the best payment processing rate for your business.

Ignorance may be bliss when it comes to payment processing: when you don’t realize you’re paying too much, there’s nothing to get upset about. 

But since you’re reading a blog that’s designed to save your business money, we’re guessing you don’t want to remain in ignorance.

That’s why we’ll teach you how to negotiate a merchant agreement with your payment processor that avoids unnecessary fees and saves you the most money.

Why negotiate a merchant agreement?

When it comes to negotiating merchant contracts, there are two important facts to first establish: 

  1. Merchants (like you) pay different rates for the same payment processing.
  2. Many payment processors hide unnecessary fees to make more money.

Let’s start with the first point: You might be paying more than the business next door for the exact same payment processing services.

This is because some merchant service providers (aka payment processors) simply charge more for the same services. Because there’s not a governing body for payment processing, it’s up to each provider to decide what to charge.

This connects to the second point: some payment processors can be unscrupulous. As we wrote about in our article on what to avoid in a credit card processing contract, these shady processors can attach fees that shouldn’t be there or charge too much for other services.

That’s why it’s important to read and understand a merchant agreement first. Let’s see what that means for you.

Understand the purpose of a merchant agreement

In order to clearly establish expectations between you (the merchant) and the payment processor, a merchant agreement is put together. 

This is usually a series of documents that describes what’s to be expected between the different parties, as well as the rules of behavior, costs, terms, and conditions. It may include other parties beyond just you and the payment processor, such as payment gateway providers. 

Along with the actual services provided, the agreement might also address any equipment that’s being leased.

Agreements are nothing new to most of us. But while we may skip reading the different user agreements when we install an app on our phones, this isn’t how you need to treat a merchant agreement. Why not?

Merchant agreements will affect your business much more than a simple phone app–especially if you find yourself in an agreement that is costly or has unfavorable terms for your business. 

How to negotiate a merchant agreement

When it comes to negotiating a merchant agreement, your greatest asset is knowledge. 

That means you should have the facts in hand as you approach the conversation with the merchant service provider. These include what can be negotiated, what parts are the most important for your business, and everything else payment processors are offering.

What parts of a merchant agreement can be negotiated?

Before we can establish what can be negotiated, it’s important to know that most of the agreement cannot be changed–roughly 90%, in fact. Aspects like card associations, essential services, and industry standards of course are beyond the influence of payment processors.

While that may sound discouraging, it’s actually quite significant. Think about it: 10% of everything else in a contract can be tilted in your business’ favor. 

As you are engaging with the payment processor, politely but firmly insist on having the following terms in your merchant agreement:

Contract duration

There’s no reason to get locked into a contract for a period of time. Why not?

A merchant agreement doesn’t have to be for a certain period of time. While some payment processors want to lock you in for a year or even many years, this is something that’s entirely up to them.

This may actually be a sign that you’re getting a bad deal. Afterall, if they are forcing you to stay, it’s more than likely because they know you will leave once you find a better deal.

Early termination fees (ETF)

Don’t accept these unnecessary fees in your merchant agreement. 

If these penalties are in a merchant agreement, it’s to keep you locked in to a lengthy, costly merchant agreement. 

Also known as liquidated damage clauses, ETFs are often imposed by dishonest merchant providers. 

Again, if you have a good merchant agreement, the payment processor knows you’re going to want to keep it and they won’t need to threaten you to stay via these penalties for early termination of the agreement.

Auto renewals

Auto renewals are not required in a merchant agreement. This is another unnecessary part that you should avoid in your merchant agreement.

This becomes obvious when you think about it: if a merchant service provider doesn’t need to lock you into a merchant agreement in the first place, why automatically renew your agreement as well?

The most important parts of a merchant agreement

Here’s what you definitely want to avoid as you negotiate your merchant agreement:

Tiered pricing

Our understanding pricing structures for credit card processors article clearly explained that Tiered Pricing is almost always more expensive for your business due to higher rates and fees. 

Even though it’s well known that tiered pricing is often more expensive, it’s still a common charging method throughout the industry.

This contrasts with the far-less expensive structure of Interchange Plus pricing, where all you pay is the actual costs from the card association plus the costs of processing.

So make sure to insist on Interchange Plus in your contract, or be ready to walk away from the contract.

Inflexible Rates That Rise Over Time

Know that low initial credit card processing rates that periodically rise over time is not an industry standard. This can help you avoid paying hundreds or even thousands in unnecessary processing costs.

Instead, make sure the contract shows a standard rate that remains the same for the entire contract.

What else you should know

Purchase your own equipment

If your merchant agreement features included equipment, it’s something you’re going to want to change. Why is this important to know?

Whether it’s a promise of “free” equipment from the payment processor or it’s leased equipment in the contract, the outcome is the same: you’re going to be overpaying.  

Instead, purchase your equipment outright. You’ll always end up paying less this way.

Read the application thoroughly

Sometimes the application will contain binding terms that forces you into a contract if signed. Not only that, but there may be hidden fees in the application that aren’t disclosed in the contract.

So be sure to read and understand the application fully. 

TIP: If the agent is pressuring you to sign without giving you enough time to read, that is likely a warning sign that you’re going to be entering into a bad merchant agreement.

How to get out of a bad merchant agreement

If you found yourself in a bad merchant agreement, you still have a few options. The best course of action really comes down to doing some basic math.

Take the following steps: 

  1. Contact other merchants to shop around and see how much you will pay using their services.
  2. Calculate how much you have left on your merchant agreement.
  3. Calculate the cost of canceling, including any early termination fees involved.

If the savings you’ll enjoy from going with a different merchant is greater than what you’ll have to pay to get out of your current merchant agreement, then it is worth ending the contract–even if you’ll have to pay penalties.

Otherwise, you may be better off simply waiting for your merchant agreement to end. 

TIP: Be sure to advise your current merchant service provider to cancel with them according to their terms in order to not pay any other fees.

Fortunately, Progressive Payment Solutions will happily tell you how much you will pay if you team up with us for payment processing. Contact us today to get a free quote, no strings attached.


When you’re armed with the facts, you can get the best merchant agreement for your business. Make sure to read the application and the contract fully before signing, and have clearly in mind what fees are not required. 

It’s always worth it to shop around for the best deals. Progressive Payment Solutions has a customer service agent waiting to provide straight-forward answers on rates, fees, and everything else you need to get the contract you deserve. Reach out today to start saving your business money.

Looking to Save Money on Payment Processing?


Download free guide with advice from experts!