Before you sign a three-year term

The advisory line on this website says I’ll give you a second opinion before you sign anything with a three-year term, and of everything I do two days a week, that is the one people book fastest. Usually there is a deadline attached. A rep has quoted a rate, the quote “expires Friday,” and someone has a bad feeling they can’t name. The bad feeling is almost always correct, and it is almost never about the number the rep circled.

I spent fourteen years in IT, the last stretch running infrastructure for a freight company out in Laverton, and I signed or inherited a great many multi-year agreements for hardware, connectivity and software. I read them properly maybe half the time, which in hindsight was half a time too few. The contracts that hurt were never the ones with a bad headline price. They were the ones with a reasonable headline price and a tail I hadn’t costed.

Where the money actually hides

The circled number is the bait. Here is where the cost sits instead.

The promotional rate that steps up. A merchant rate of “1.1% for the first twelve months” is doing a lot of work in that sentence. Ask what it becomes in month thirteen and get the answer in writing, because the whole model assumes you won’t switch once you’ve wired the terminal into your point of sale and trained the staff. Compare it against a flat, no-lock rate. A Zeller terminal is a one-off hardware purchase of around $199 with no monthly rental, no lock-in and a flat 1.4% a tap on every card, and I keep it in mind as the clean line to hold every “promotional” offer against. If a three-year deal can’t beat a no-contract flat rate across the whole three years, the term is the product they’re actually selling you.

Per-terminal monthly rental. This is the one that does the most quiet damage, because the terminal rental is frequently a separate agreement from the merchant services agreement, often with a different company — a finance or leasing entity — on a different renewal cycle. You think you have one relationship. You have two, and only one of them ends when you think it does.

Minimum monthly merchant fees. A “minimum monthly service fee” of, say, $22 means that in a quiet month you pay $22 regardless of turnover. Fine if you’re busy. Less fine over a slow winter, or if the facility is for a seasonal side of the business.

Early termination fees. Read how these are calculated. “Remaining months of rental” is a very different animal from “a fixed administrative fee.” I have seen ETFs written as the full remaining term of the rental, which means leaving early costs you exactly what staying would have. That is not an exit; that is a toll booth with no road behind it.

Automatic rollover. The clause that says the contract renews for a further term unless you cancel in writing 60 or 90 days before the end date. Miss the window, and the window is designed to be missed, and you are locked in for another full term.

A client of mine, a physio practice up in Coburg, came to me because their bookkeeper had flagged something odd in Xero. They’d switched card providers cleanly, or so they thought, and posted the two old terminals back in a satchel via Australia Post. Fourteen months later they were still paying $49 a month, each, in terminal rental. The rental sat with a separate leasing company, auto-debited, described on the statement as an equipment fee with a reference number and nothing else. Nobody had cancelled it because nobody knew it was a distinct contract. That’s roughly $1,370 of rent on two boxes of plastic sitting in someone’s warehouse. The devices were gone. The agreement wasn’t.

The unfair contract terms regime is now on your side

Here is the part that has genuinely changed, and that a lot of small operators still don’t know about. Australia’s unfair contract terms law, under the Australian Consumer Law, was strengthened on 9 November 2023, and the change has teeth it didn’t have before.

Two things matter for you. First, the small-business threshold was widened. Protection against unfair terms in a standard-form contract now applies where at least one party is a business employing fewer than 100 people, or with an annual turnover under $10 million. The old test was 20 employees and a $300,000 contract value, which excluded most people I sit across from. Now it covers almost all of them.

Second, and this is the real shift, civil penalties now apply. Before November 2023 a court could declare a term unfair and void, and that was largely the end of it. Now a business that proposes, applies or relies on an unfair term in a standard-form contract can be penalised, and the maximums are not symbolic: for a company, the greatest of $100 million, three times the benefit obtained, or 30% of adjusted turnover during the breach period; for an individual, up to $2.5 million. That changes the incentive for the party who wrote the contract, which changes your negotiating position before you’ve signed anything.

A term is potentially unfair, under the ACCC’s test, where it does three things together: it causes a significant imbalance in the parties’ rights and obligations; it is not reasonably necessary to protect the legitimate interests of the party it benefits; and it would cause detriment, financial or otherwise, if it were relied on. An automatic rollover with a buried cancellation window, a unilateral right for them to change fees mid-term, an early termination fee that bears no relation to their actual loss: these are exactly the sorts of terms the regime was strengthened to catch. That is not legal advice and I am not a lawyer, but it is worth knowing which way the wind is now blowing when you ask for a clause to be changed.

What to get in writing before you sign

Do this by email, so there is a record, and ask them to confirm each point in reply rather than over the phone. If a rep won’t put an answer in writing, you have learnt something.

• Every rate after any promotional period ends — the month-thirteen number, not just the month-one number.
• Whether terminal rental is a separate agreement, who holds it, and its own end date and cancellation terms.
• The exact early termination fee and how it is calculated.
• Any minimum monthly fees, and whether they apply in months with no transactions.
• The rollover clause and its notice window — and a request, in the same email, that the automatic rollover be struck out and replaced with month-to-month at the end of the initial term.
• The exit process: what you post back, to which address, and how you get written confirmation the account is closed and billing stopped.

You can ask for the rollover clause to be removed. People forget this is allowed. A standard-form contract is called that because they printed it before they met you, not because it’s a law of physics. Plenty of providers will strike an auto-renewal and move you to month-to-month at term end if you ask before signing, precisely because they’d rather have the deal than argue about a clause that’s now sitting on the wrong side of the unfair-terms regime anyway.

How to actually get out

When the day comes to leave, treat closing the account as its own project, not a phone call. Give notice in writing inside whatever window the contract specifies, and keep the sent email. Send the hardware back with tracking through Australia Post and keep the tracking number. Then, and this is the step the Coburg practice skipped, separately confirm that every associated agreement is closed, the merchant facility and the terminal rental both, because they may end on different dates with different people. Watch the bank statement for two full billing cycles after you think you’re done, and reconcile it against the closure confirmations. Keep the paperwork for five years, which is the record-keeping period the ATO expects of you anyway, and which happens to be exactly long enough to cover you if a “final” fee turns up eighteen months later.

The three-year term isn’t the enemy. Sometimes the pricing genuinely is better for the commitment. The enemy is signing it without knowing what it costs to be wrong, and the whole document is built so you don’t find out until the box is already in the post.