What an early termination fee is
An early termination fee is what a processor charges if you end your contract early, or without the notice the contract asks for.
Not every processor has one. Here is what three published sources say:
| Provider | What its published terms say |
|---|---|
| TD Merchant Solutions | An “Early Termination Fee” if you end without the required notice. $300 per location, or $20 per terminal for each month left |
| Helcim | “There are no penalties for termination” |
| Square | “No long-term contracts or equipment fees. Cancel anytime” |
TD’s current terms define the Early Termination Fee as the fee for ending “without giving the required notice”. They say it was “previously referred to on the Fee Schedule as a ‘Deactivation Fee’”. TD’s older terms (version 1125) used the names the other way round. So your paperwork may use either name.
Flat fees versus fees that grow with the term
TD’s fee list shows both kinds:
- A flat $300 per merchant location (“Deactivation Fee I” on TD’s fee list).
- $20 per terminal, times the number of terminals, times the months left in the term (“Deactivation Fee II”).
TD’s fee list shows these under “Termination Fees”, with the fee schedule and statement name “Early Termination Fee”.
A flat fee stays the same whenever you leave. A per-month fee is largest early in the term and shrinks as the end gets closer.
Finding the number in your contract
An agreement usually sets out these:
- The term. TD’s terms set an initial term of three years from the start date, unless the application or summary box says otherwise.
- Renewal. TD’s terms say the agreement then “will automatically renew for additional renewal terms of six months” unless either side gives written notice at least 45 days before the end of the current term.
- The fee. It may be called an early termination fee, a deactivation fee, or a cancellation fee. At TD, the amount is in the fee schedule.
- The summary box. Helcim’s disclosure has a section called “Cancellation of contract and any applicable penalties”. TD’s terms list an “Information Summary Box” as part of the agreement.
When you can leave without paying
TD’s terms list two cases with no early termination fee:
- Within 30 calendar days of the start date, if you stop using all services and return all rented equipment. The 0726 terms say bought equipment does not have to be returned. (The older 1125 terms said “all equipment”.)
- Within 70 calendar days after a fee change that TD has notified you of. That covers a new or higher TD fee, or a new or higher card network fee that TD passes on to you, in part or in full. It also covers a cut in a card network fee that TD does not pass on in full.
TD’s sample statement shows this in practice. Its fee-change section has a column called “Date to cancel by without penalty”.
Other terms that matter:
- Renewal dates. Under TD’s terms, giving notice at least 45 days before the term ends stops the renewal.
- What you still owe. Ending the agreement does not wipe out everything. Helcim’s disclosure says termination does not affect “fees owed for processed transactions or related chargebacks”. TD’s terms say TD may hold back funds for 180 days after termination to cover amounts that come due, then credit the unused part.
- Equipment. TD’s terms say that when the agreement ends you must stop using, or return at your own expense, all rental equipment. See Equipment Leases.
Canada: the Code of Conduct window
Canada has a Code of Conduct for the Payment Card Industry. TD’s terms say that, “as required by the Code of Conduct”, TD will notify merchants between 30 and 60 calendar days before certain fee increases take effect.
The FCAC’s merchant-rights page says what the Code itself requires:
- Notice: 30 to 60 calendar days before certain fee increases, new fees, and network fee reductions that are not passed on.
- Exit: notice of intent to exit without penalty within 70 calendar days after an applicable fee change takes effect. The fee-change notice must include the date that period ends.
- Cancellation: after notice to cancel, cancellation documents must be sent within 5 business days. The cancellation takes effect on the date asked for if obligations such as returning rental equipment are met and the date is at least 30 calendar days after the documents were submitted, unless agreed otherwise.
- Renewals: fixed-term agreements can renew automatically only for 6 months or less. Notice of non-renewal can be given at least 45 calendar days before the end.
- Exceptions: fee increases on a schedule in the agreement, such as the end of a promotion, and services unrelated to card processing.
More: The Code of Conduct for the Payment Card Industry.
Where to go from here
Three things in an agreement set the cost of leaving: when the term ends, how much notice is needed, and what the fee is. Fee-change notices on recent statements can also carry “cancel by” dates. How to Read Your Merchant Statement shows where those notices appear. What three US providers’ terms say about leaving is in Switching Processors in the US.
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