Does a merchant account contract guarantee rates?

Merchant account contracts do not guarantee that rates will not change within the contract period. Merchant account providers cannot guarantee that rates will not change over the length of a contract term because they do not have control of the rate. The card originator such as VISA, MasterCard, American Express and Discover control the discount rates that are paid to accept their card brands. These rates are passed along to acquiring banks, processors and ultimitley to ISOs (Idependant Sales Offices/Organizations) and MLSs (Merchant Level Sales) that typically deal directly with merchants.



Merchant account contracts can be imposed by different organizations at different levels of the industry food chain. For example, a large processor may require an ISO selling their processing services to impose 3-year contracts and then allow the ISO to determine the cancellation fee. In another example, a processor may not require a contract at all but will allow an ISO to impose one if they wish. In this case the ISO would have complete control to impose a contract of whatever length and cancellation fee that they choose. In both examples neither the processor or the ISO would have control of the discount rates.

For this and other reasons merchant account contracts are often looked at by people inside and outside of the electronic bankcard industry as a bad sales practice. MasterCard published a document in 2002 titled, "ISO Guide to Working with Acquirers" that specifically mentions merchant account contracts in a negative light. Page three, paragraph four of the document under the heading "Acquiring Risk" MasterCard states that:

"Reputation Risk. Despite the legitimacy of the vast majority of sales representatives, a small minority 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."
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While merchant account contracts do not and cannot guarantee that discounts rate will not change within the contract period it is possible for contracts to guarantee that other fees will not change. Depending on the agreement that a merchant level sales entity such as an ISO or MLS has with their processor or bank, they may have control over certain merchant account fees such as the statement fee, monthly minimum, etc. whereby they would be able to guarantee that such rates would not change within a contract period. Clauses such as this are not standard in merchant service agreements and would almost certainly have to be drafted from scratch for any merchant requesting a guarantee that fees would not change within a contract period.

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Summary
Merchant account contacts do not guarantee or lock-in discount rates because the merchant service provider does not have control of these rates. If they were to guarantee rates and the rates were to rise they would lose money.

However, depending on the individual merchant service provider it may be possible for them to guarantee that standard fees such as statement fees, monthly minimums and other fees will not change within a contact period. Such agreements would be on a case-by-case basis and would almost certainly require a unique amendment to the existing merchant service agreement for that provider.

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