How to Switch Someone with an Early Termination FeeMay 11
This is just a quick post to give you some options on how to handle someone that you have to switch from another processor with an early termination fee and it was actually taken from a response to an agent’s question yesterday. He asked, “Is the average ETF $250 to $500 and how do you sell someone with an ETF especially when the savings are not large?”
My response: “Yes, $250 to $500 is the average range. Keep in mind that NAB (North American Bancard) pays half the ETF up to $195 when the merchant processes $5,000 to $9,999 the first 30 days and 100% of the ETF up to $295 when the merchant processes 10,000+ the first 30 days, so that takes care of 60% to 70% of your deals.
On the rest, keep in mind that paying the fee makes sense for the merchant as long as they will have positive cash flow from the decision within a few months. So, if we are saving them $80 per month which is not unusual it would make sense for them to pay a cancellation fee of $250 and really much more than that. Also, you will be getting $200 to $300 up front commission so, if getting the deal means paying $100 or so of your money and the monthly profit justifies a decision like this, you could do that as well and I have found this to be very effective because the merchant sees how committed you are to getting their business and they see that you really are an independent business owner like them, not a robot for some big company that has to follow protocol.
On the few merchants where the savings doesn’t make sense for the cancelation fee, remember that to leave their old account open and just stop processing with it, will usually cost between $10 and $20 per month, so if we are saving them $40 or $50 per month and they have say 12 months left on a 3 yr agreement with a $500 cancellation fee, just give them a new terminal and have them put their old one under the counter for 12 months. They will still save around $200 to $350 the first year even with paying the other processor to leave that account open and then they can cancel with no penalty and increase their savings the next year.
One last tip on how to pitch this, I often say, “Bob, do you have any investments like a 401k or retirement account?” They respond, “Yes” if they respond “No” just say “…but, you understand how investments work obviously since you are in business.” Then say, “If I offered you a stock that was $500 per share and there was a guaranteed dividend payment of $80 per month on that stock, do you think this is a good investment since you will have your money back in about 6 months and after that it would be pure profit, I mean that is what 200% return on your investment? Pretty good deal right?” That is exactly what I am offering you today Bob, if you pay $500 to cancel your old processor and you continue accepting credit cards which I’m sure you will do, you will make a profit or in this case a savings of $80 per month (or however much they will be saving). If you decide that you do not like our service, we have no contracts and your old processor would gladly give you the $500 back to earn your business so you really have a no lose situation here and your investment is literally guaranteed.”
Hope this helps!