Many businesses stay with a card provider they are unhappy with because leaving looks complicated. It often is more complicated than it should be, mainly because what feels like one "card machine contract" can actually be two. This guide explains what to look for and how to switch without paying for two machines at once.

Key points

  • Your card processing (acquiring) contract and your card machine rental can be separate agreements, with different terms and different exit fees.
  • The Payment Systems Regulator (PSR) found terminal contracts can run for longer than acquiring contracts, for example three or five years, and may renew automatically.
  • Since 2023, PSR rules have limited new terminal contracts from directed providers to an 18-month initial term, then monthly, for businesses with card turnover up to £10 million.
  • Before you switch, find both contracts, check the end dates and notice terms, and get any exit fee confirmed in writing.

Two contracts, not one

Card acceptance usually involves two things: the service that processes your card payments (card acquiring) and the machine you take them on. The PSR found that acquirers tend to price these separately (PSR card-acquiring market review, final report, para 3.63), and that an independent sales organisation (ISO) may hire you a terminal itself or refer you to a third-party terminal provider and sign you up to a rental agreement (para 3.87).

That matters because the two agreements can have different rules. The PSR identified two specific problems for businesses trying to switch (final report, summary):

  1. A business typically cannot use its existing terminal with a new acquirer, so switching may mean getting a new terminal and cancelling the old terminal contract.
  2. A business could face a significant early termination fee on the terminal contract, even where no fee applies to leaving the acquiring contract.

Notice periods and minimum terms

The PSR found that acquirer and payment facilitator contracts for card acquiring are often of indefinite duration (PS22/2, Table 1). In practice, that means there is no natural end date prompting you to review, and leaving is governed by whatever notice period the contract sets.

Terminal contracts can be different. The PSR found they can have longer initial or renewal terms than acquiring contracts, giving three and five years as examples (final report, summary).

Look in each contract for:

  • the minimum or initial term and its start date
  • the notice period and how notice must be given (for example, in writing)
  • what happens at the end of the minimum term: does it end, roll monthly, or renew for another fixed term?

Early termination fees

The PSR found that early termination fees on terminal contracts can include all outstanding payments due up to the end of the initial or renewal term (final report, summary). If you are part-way through a long rental, that can be a large sum. Always ask for any exit fee to be calculated and confirmed in writing before you give notice.

Auto-renewal

Some terminal contracts renew automatically for successive fixed terms (final report, summary). If you miss the window to give notice, you may find yourself committed to another full term. Put the notice deadline in your diary as soon as you find it.

What the PSR rules changed

After its market review, the PSR directed a group of the larger acquirers and payment facilitators, including Barclays, Elavon, Lloyds Bank, Worldpay, SumUp, Square, Stripe and PayPal, to put remedies in place (Specific Direction 16, consolidated). For businesses with annual card turnover up to £10 million that use a directed provider's acquiring services, terminal contracts must meet these rules, whether the terminal comes from the directed provider or from a third party such as an ISO or leasing company (SD16, paras 3.3 to 3.6):

  • any initial minimum term on a new contract must be no longer than 18 months
  • after that, the contract can only continue on a maximum one-month recurring term, with one month's notice on your side
  • any exit or termination fees must be cost based, transparent and fully explained before you sign

This remedy applied from January 2023 (PS22/2). Existing contracts could complete their initial minimum term before moving to rolling monthly terms.

There are limits. The rules do not apply where a business rents a terminal from a supplier that has no contractual relationship with its acquirer or the ISO selling that acquirer's services, although the PSR said this was not common for businesses of this size (PS22/2, para 2.62). And if your provider is not one of those directed, the rules may not cover you at all. Read your own contract rather than assuming.

The PSR also required directed providers to send "trigger messages" prompting you to shop around, timed to 30 days before a minimum term expires, or at least monthly with your invoice where there is no minimum term, for businesses with card turnover up to £50 million (PS22/2, paras 2.51 and 2.53). If you see one, it is a good moment to review.

Questions to ask before you switch

Ask your current provider, and get the answers in writing:

  • Is my terminal on the same contract as my card processing, or a separate one? Who is the terminal contract with?
  • When does each minimum term end, and what notice do I need to give?
  • What exit fee, if any, would I pay on each contract if I left on a given date?
  • Do I need to return the terminal, and how?

Ask any new provider:

  • Is there a minimum term, and what happens when it ends?
  • Is the terminal rented, bought outright or included? On what terms?
  • What are all the fees, not just the headline rate? Ask for the fees that would appear on your statement, such as authorisation, PCI and minimum monthly charges.
  • How long will onboarding take before I can take payments?

How to switch, step by step

  1. Find every contract. Look for the acquiring agreement and any separate terminal rental or lease agreement. Your direct debits can help you spot companies you have forgotten about.
  2. Note the dates. Write down each minimum term end date, notice period and notice method.
  3. Get comparable quotes. Compare offers on your effective rate, not just the headline rate. Our guide to reading your card machine statement shows how to work it out.
  4. Set up the new provider first. Complete onboarding and have the new terminal working before your old service ends, so you are never unable to take payments.
  5. Give notice properly. Follow each contract's notice method and keep proof of sending.
  6. Return equipment as instructed. Keep a record of the return in case of any dispute later.
  7. Check the final statements. Make sure charges stop when they should. Cancelling a direct debit does not end a contract, so only cancel once the contract has properly ended.

Get a free comparison first

Before you give notice, it helps to know what you would actually save. You can upload a recent statement for a free comparison. A UK advisor at The Rate Dropper will work out your effective rate and show what the same volume would cost with Worldpay, Dojo, SumUp, Zettle, takepayments, Barclaycard, Elavon and Square. It is free for businesses; we are paid a commission by the provider you choose.