Pivotal Payments is another card processor that uses a tiered pricing model in which cards are categorized as qualified, mid-qualified and non-qualified, with higher rates associated with non-qualified cards.
This basically means that you can count on paying more than the advertised (qualified) rate due to the large number of cards which are classified as non-qualified. This is a very common tactic used by processing companies and should be avoided.
For a more thorough explanation of tiered pricing, click here.
But what sets Pivotal Payments apart from other tiered pricing processors is their unique method of handling membership.
Notice that I said unique, not good… or ethical. Namely, they employ automatic membership renewal and cancellation fees based on liquidated damages.
As we’ll see in the coming paragraphs, these two tactics are used in conjunction, with the cancellation fee working as a safe guard against merchants that wise-up to the tiered pricing and want to opt out.
Auto Renewing Contracts
Let’s start with the automated membership renewal, as this is the first part of Pivotal Payments trickery.
Pivotal Payments processing agreements come in three year contracts. When the three years is up, service is continued through a new three-year contract without notification of the renewal.
The merchant has 30 days to cancel this renewed membership; however, once again, the merchant has no knowledge of this 30-day cancellation period.
This information is intentionally omitted so that once merchants decide to find more reasonable rates they are forced to pay the cancellation fee.
Pivotal Payments design their contracts with cancellation fees based on liquidated damages. Liquidated damages is defined as the amount of money Pivotal Payments would make over the entire contract if the amount they are currently making continued at the same rate.
For example, if you were two years into a contract and paying Pivotal Payments $500 per month, you would owe them a cancellation fee of $6000 ($500 * 12 months).
The only time this cancellation fee wouldn’t be in effect is during the 30-day period after a three-year contract ended. The only problem is they don’t tell you that the contract has ended or that it has been automatically renewed.
This is absolutely ridiculous. As we have seen with other card processors that use tiered pricing, cancellation fees and other hidden costs, dishonest card processors will attempt to take money from small businesses any way they can.
At 99MerchantAccount.com, we are committed to transparent billing. It is our goal to make you understand where your money is going and comfortable that you are paying no more than you should be.
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