Terminating, in most cases, requires paying up to $500, which is burdensome for most small retailers. Further exacerbating the situation is the requirement that small retailers sign new merchant services agreements when taking on merchant cash advances. With many merchants already paying 50 basis points (.005) more on transaction processing based simply on being with the wrong service provider, the playing field is very uneven across the small retailer landscape. For example, assuming $20,000 in monthly credit card sales, reducing (card present) rates from 1.69% to 1.19% saves small retailers $100 per month or $1,200 annually.
The absence of a long-term contract for small retailers not only means their merchant services provider has to earn their business day in and day out, but more importantly that they won’t face stiff penalties when they have to pivot to remain competitive in the marketplace. In no way does this close the gap between how big and small retailers are treated in the marketplace, but it does provide much needed room to breath while plotting course to keep up.