Are long term contracts and cancellation fees required by the bank?

If a merchant account service provider says you need to sign a contract that locks you into a long term commitment with early cancellation fees, beware. MasterCard has issued a statement about this: “a small Minority [of sales representatives] engage in practices that can damage the reputations of ISOs and acquirers. Such practices can include hidden fees, gouging on terminal leases, bait-and-switch pricing, the promise of “guaranteed” merchant approval, Internet “spamming” (unsolicited mass emailings), laundering, inaccessibility for resolution of customer service issues, and contract cancellation penalties.”

MasterCard's statement will help you to differentiate a good merchant and an unscrupulous one. Signs include high equipment leases, introductory rates, unfair contracts, guaranteed rates, and guaranteed approvals. No merchant account provider can guarantee the discount rates will stay the same because the discount rate depends on the interchange rate and the interchange fee is established by issuing banks. A merchant account provider also can't guarantee that a merchant will be approved. Despite efforts to clean up the industry, merchant brokers use many unethical tactics to get as much money as they can from merchants. There are so many merchant account brokers that it is difficult to tell how many middlemen are involved when you apply for a merchant account. It is always a good idea to read reviews on merchants before you decide to sign a contract with a provider. Obviously the more middlemen, the more fees you're going to pay. The large number of merchant account fees also makes it difficult to decide on whether a merchant account provider is just an introducing broker or a real merchant account bank.