Progressive Payment Solutions

What to Avoid in a Credit Card Processing Contract

When you hear the word “contract, you might have an anxious feeling wash over you. Maybe you imagine being charged with hidden fees or paying more than you expected—all while stuck in an agreement that you can’t get out of.

And there may be good reason to feel that way: many have had the misfortune of entering into a contract without knowing what they were signing up for. The result? They had to experience the hidden consequences listed above, among others.

Fortunately, you can avoid these situations if you know what to watch out for. While some contracts can be long, it’s always worth it to read them. Doing so lets you avoid making a mistake by letting you spot items that you’ll regret signing up for. 

Let’s take a look at some of the most important things to avoid when signing a credit card processing contract. We’ll also see what to look for instead, helping you to save money, hassle, and stress.

Year-to-Year and Multi-Year Contracts

The fact is, there are many shady credit card processing companies. It’s sad, but it’s true. And it’s important to establish that right away in order to go into an agreement with your eyes open. Once you recognize how shady processors work, they’re easier to spot.

So what’s the first telltale sign of a sneaky credit card processor? They want to lock you into a long contract. This might be for one year or many years. 

Why would they want such a large commitment from you? Think about it: they know that you’re getting a bad deal, and that you might find out sooner or later.

Once you find out, though, it’s too late for you. They have you locked in paying too much for many more months or even years.

What to look for instead: 

Avoid being locked in to annual or multi-year contracts by going with a monthly contract, if possible. 

Early Termination Fees

This next trick of underhanded processors goes hand-in-hand with long contracts: having to pay a hefty fee if you terminate the contract early.

Why do they want to include this fee in the contract? Again, because once you realize you have a bad situation on your hands, you’re going to want to get out. That’s going to cause the shady processor to lose your money.

And once you realize how expensive it is to leave the contract, you likely recognize you’ll lose less money by sticking with it till the end instead of paying early termination fees.

What to look for instead: 

Avoid contracts with early termination fees. And even if a contract doesn’t have an early termination fee, read through the account closure section in detail so you can understand what’s involved if you decide to change providers.

Auto Renewals on Annual and Longer Contracts

A sneaky payment processing company wants to keep charging you too much. So they might look to use another tactic to keep you locked in: a contract that automatically renews itself.

Before you know it, the length of time you originally commit to using that processor has passed. Are you free? Sadly, no. You fell right back into the same contract, with the same high cost. Frustratingly, you’re locked into another year or even longer.

What to look for instead:

As you read through the contact, see what the renewal terms are. If you see an auto renewal, ask for monthly renewals instead.

Tiered vs. Interchange Plus pricing

As you can see in our “Understanding Pricing Structures for Credit Card Processors” article, some pricing structures are less expensive than others. The article explained that Tiered Pricing is generally a bad idea, since it usually means higher rates and fees for your business.

Even though it’s no secret that tiered pricing is often more expensive, it’s still a common charging method throughout the industry.

What to look for instead: 

Double-check how you’ll be charged in your credit card processing contract and always get Interchange Plus pricing if you can.

Inflexible Rates That Rise Over Time

Another deceptive tactic of some processors is enticing you to sign up with a low initial credit card processing rate. It may seem like a great idea. And if it stayed that way, it would be!

But it soon begins to snowball, periodically rising over time. In the end, you’re locked into paying far more to process credit cards.

What to look for instead:

As you examine the contract, look for charts or wording that indicate the rate won’t remain the same. Also, keep on the lookout for an automatic increase in rates at the provider’s sole discretion.

Promises of “Free” Credit Card Equipment

As the saying goes, “there’s no such thing as a free lunch”, meaning you pay for something “free” one way or another. The same is true with credit card equipment that’s labeled “free” by some processors.

These providers will offer you free credit card processing equipment that’s not actually free. Why not? Because they hide the cost of the equipment in their other fees. 

The result? You’re still paying it, even if it’s not specified as a separate cost. 

Additionally, this “free” equipment is typically offered in annual or longer contracts, locking you in for the entire period.

What to look for instead: 

It’s almost always better to buy or rent the equipment separately from the contract. That way, you’ll end up reducing your overall costs and won’t be stuck with one processor.

Liquidated Damage Fees

Last but not least are fees that can destroy a merchant business’ bottom line called “liquidated damage fees”. 

Why are they to be avoided? Because these fees could mean you’ll continue to pay average processing fees to the provider whether you use them or not.

What to look for instead:

As you read through the contract, make sure this fee is nowhere to be found. If you ever see “damage fees” listed anywhere in your contract, immediately run the other way. Find a more reputable payment processor that doesn’t list them in their contracts.


There’s good news and bad news about credit card processors.

The bad news: there are underhanded payment processing companies that want to lock you into an expensive contract, having you pay too much or charge unnecessary fees.

The good news? Not all processors include these terms in their contracts. So by knowing what to avoid to save money for your business, you can also separate the bad processors from the good ones. 

Progressive Payment Solutions loves empowering businesses like yours to make decisions that lead to success. One way we do this is by keeping things simple for our customers. We’re always fair and transparent in our pricing. We offer month-to-month contracts, and we’ll explain all of your options when it comes to areas like equipment rental, termination fees, and more.

Another way we empower businesses is by educating them. That’s why we put together a complimentary guide on the five most important steps to choosing a payment processor to keep you moving forward.

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