Merchant Services Agreement: What to Know Before You Sign [2023]

Don’t sign a merchant agreement before reading this guide. Understand what a good merchant agreement should include and learn to identify red flags.

If you want your business to be able to accept credit cards, you’ll have to sign up with a merchant service provider who will process those payments for you. As with many service-provision relationships, you’ll need to sign a merchant agreement (also called a merchant services agreement).

While we are all guilty of signing agreements without reading them, you should familiarize yourself with your merchant agreement before you sign. Payment processing is not something to mess around with – you want to be sure that your customers’ financial data is secure and that the funds will actually end up in your account.

Unfortunately, there are some dishonest merchant service providers out there and if you aren’t careful, you can find yourself getting burned. We’re here to explain exactly what a merchant agreement is, what elements it should include, and some red flags to look out for so you can be sure you do what’s best for your business.  


What Is a Merchant Agreement?

Your merchant service provider, who will enable your business to receive credit card payments, is one of the most important services you’ll use as a business owner. You should make sure you understand all of the contents of the merchant agreement before you sign it. 

A merchant agreement is a binding legal contract between you (the merchant) and the company that processes credit cards for you. The purpose of the agreement is to lay out the specific services that’ll be provided, all of the terms and conditions including fees, and what happens in the case of disputes. 

By signing the agreement, you authorize the service provider to serve as an intermediary between you and your customer. The provider is responsible for processing all electronic payments through its network from start to finish, including ensuring that funds settle and are deposited into your account. 

What Are the Most Important Parts of a Merchant Agreement?

Each merchant service provider has its own merchant agreement, so there’s no standard that everyone uses. There are, however, certain sections that any good merchant agreement will have. These sections include (but aren’t limited to): 


Merchant service providers use different pricing models depending on their own strategy. The agreement should describe in great detail exactly what fees you’ll be charged, how they are calculated, and what they cover. 

Most providers charge both a transaction fee and a processing fee. A transaction fee is more likely to be charged at a flat rate per transaction, while a processing fee is usually a small percentage of each transaction amount. 

Fees can vary quite widely from provider to provider, so make sure you do your homework on this one. is a good choice because it charges a flat-rate per-transaction fee. There are no hidden fees, and you’ll always know exactly how much you’ll be charged.  

Terms and Conditions

This is the longest section of agreement and the one that is most likely to make your eyes glaze over, but it’ll save you future headaches if you read it carefully. It’ll include all of the rules and regulations that you are required to comply with. Most of these rules are based on industry standards and are probably fairly similar among all the providers. 

Keep in mind, though, that the Terms and Conditions section is the ideal place for dishonest providers to sneak in clauses that you wouldn’t want to agree to (they are counting on you to just skim!).  

Included in this section will be:

  • Contract length: The industry standard is 36 months, but this can vary and may be anywhere from one to five years. Check the terms carefully for mentions of automatic renewals or you may just find yourself unwittingly signing on for extra time.

  • Early termination: You can always get out of the contract mid-term, but at a cost. Early termination fees can range between $300-$500 and may be a fixed amount no matter how much (or how little) time is left in the contract.

  • Account closure: Many service providers won’t make it easy for you to leave them, so it’s important to read and understand exactly what steps to take should you decide to close your account. Some providers will ask for written notice some designated number of days before the contract expires. 

  • Disputes: In this section, providers protect themselves against legal action in the event of a dispute. The most common feature is a mandatory arbitration clause which requires you to first go to arbitration before filing a lawsuit in case of legal dispute. 

Third-Party Agreements

Not all merchant service providers are one-stop shops, but many will make things easier for you by including third-party agreements with other service providers as part of their contract. This generally happens when there’s a need to lease equipment (such as credit card terminals) or purchase a payment gateway

What to Look Out For Before Signing a Merchant Agreement

Reading the agreement carefully and in full before signing will protect you from overzealous sales agents who may be leaving out crucial information in order to get you to sign. 

It’ll also ensure that you are well aware of exactly how much you’ll have to pay and what your responsibilities are. Of course, if you see something you don’t agree with, you can always ask about it and if you aren’t satisfied with the answer, you can back out of the deal before it’s too late. 

While reading the agreement, there are certain red flags you absolutely must look out for:

  • Hidden fees: Make sure you fully understand any and all fees, including chargebacks, refunds, and statement fees in addition to the standard transaction and processing fees. 
  • Volume limits: Some agreements will specify that you’re limited to a certain number of transactions per month. Make sure you’re fully aware of this and understand what happens (and how much more you’ll have to pay) should you go over the limit.
  • Long payout times: It’s common for funds to be held in a merchant account until they settle and can be transferred to your business account. Make sure that the agreement specifies when transfers will be made so that you don’t end up waiting months to get paid.
  • No negotiations: Most of the terms in the agreement are based on industry standards and are non-negotiable, but you should be aware that there are certain elements that you can try to negotiate. These include: early termination fees, contract length, and payment structure. 

One last important warning is to be wary of any sales agent that is trying too aggressively to get you to sign. Many salespeople work on commission, and they’ll do anything in their power to get your signature, even if it’s not in your best interest. 

If you encounter a sales agent that does any of the following, you should be suspicious and make sure you check the facts (or simply look for a different provider):

  • Neglects to mention an early termination fee
  • Verbally offers to waive the early termination fee but won’t provide it in writing
  • Doesn’t disclose terms of leasing equipment
  • Pressures you to sign quickly and before taking the time to read the agreement thoroughly and ask questions
  • Doesn’t give you a copy of the contract

Click here for some tips on how to find the best merchant service provider for your needs.

The Benefits of Using as Your Merchant Service Provider 

One of the most important features to look for in a merchant service provider is transparency. That is something that we pride ourselves on at, and all of our terms and conditions are easily accessible on our website. 

There are no hidden fees at Every merchant pays a flat-rate per transaction fee, and you’ll always know exactly what to expect on your bill with no surprises. We also don’t make you go through a long and onerous onboarding process – we’re all about keeping things quick and simple. All you have to do is fill out a few basic details about your business to get started.

Of course, we do our due diligence, but we try to keep the bureaucracy to a minimum. As we walk you through the process, we’re always available to answer any questions or explain anything that’s unclear. 

Once you sign up with, you don’t have to worry about the payment process. We take care of it all from start to finish and make sure you have all the right tools in place including a payment gateway, a merchant account, and payment processing. is easy to set up and intuitive to use. You can track all your transactions and fees on your Pay Dashboard. You can also add or remove payment methods at any time at the click of a button. 

Click here to get started now!

The Bottom Line on Merchant Agreements

Choosing a merchant service provider is a crucial step in building your business and will allow you to start accepting credit card payments. Reading through the agreement and understanding all of the nuances and details will protect you against accidentally signing your life away to a less-than-ideal service provider.

Bottom line – if you’re looking for a quick and simple way to get paid, you don’t have to look further than Whether this is your first time selling online or you’ve got years of experience, gives you the full transparency you’re looking for. 

Click here to get started now!


How do I choose a merchant service provider?

Like with any service provider, you’ll have to do some research in order to choose the best merchant service provider for your business. Don’t be shy – choosing a merchant service provider is an important step and you should feel free to ask questions and insist on clear answers. Here at, we’d be happy to talk to you and see how we can meet your needs.

What are some examples of merchant services?

The term merchant services encompasses all of the tools and solutions that business owners need in order to be able to accept and process electronic payments. Examples of merchant services include payment gateways, virtual terminals, merchant accounts, and more.

What is a merchant account and how does it work?

A merchant account is a holding account. When a customer uses a credit or debit card to make a purchase, the funds are not immediately transferred to your account. Rather, they sit in a merchant account until the transaction has settled. A merchant account is a requirement in order to be able to accept online payments. You can go directly to a bank and open your own merchant account, but this is often a tiresome and bureaucratic process. When you use, we set you up with a merchant account and save you the hassle.

What are the main things to look out for in a merchant service agreement?

Before you sign a merchant service agreement, make sure you fully understand all of the fine print and small details. The most important elements to go over with a fine-tooth comb are the ongoing fees, early termination fee, contract length, and any rules regarding legal disputes.

Meet the author
Emily Kirschenbaum
Emily is a content writer with a special interest in fintech and business. She loves sharing her knowledge to help small businesses take their first steps towards success.
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