Cost examples and choosing a best-fit processor
Switching payment processors in Canada: does it pay off, and how to do it
How to work out whether switching card processors pays for itself, which one-time costs to count, how the Code of Conduct exit rights help, and a step-by-step switch plan.
Switching processors pays off when the yearly saving in total fees is larger than the one-time cost of switching within a period you are comfortable with. One-time costs can include an early termination fee, new hardware, set-up fees, POS changes and staff time. If your current contract has a fee increase in the last 70 days, or a network reduction that was not passed on in full, the revised Code of Conduct may let you leave without a termination penalty, which can make the switch pay back much faster. Compare on the same month of your own sales, in dollars, before deciding.
This guide is part of the estimates and choosing section. All amounts are illustrative.
What to count
| One-time costs | Yearly savings or costs |
|---|---|
| Early termination fee (unless waived under the Code or your contract) | Difference in processing fees on the same volume and mix |
| Lease payments still owed on equipment you no longer use | Difference in fixed monthly fees |
| New terminals or card readers | Difference in terminal rental |
| Set-up or onboarding fees | Difference in POS software or gateway fees |
| POS reconfiguration or integration work | Changes in payout timing (cost of cash flow) |
| Staff training time | Chargeback and PCI fee differences |
| Overlap: running two systems for a few weeks |
Worked example: a restaurant
Illustrative restaurant with $30,000 of monthly card sales.
- Current all-in effective rate from statements: 2.35% → $705 a month, $8,460 a year.
- New quote on the same three months: 1.85% all-in → $555 a month, $6,660 a year.
- Yearly saving: $1,800.
- One-time costs: early termination fee $300, two terminals $1,100, half a day of staff training valued at $150. Total $1,550. The new processor offers a $300 hardware credit, actually received.
- Net cost: $1,550 − $300 = $1,250.
- Payback: $1,250 ÷ $1,800 ≈ 0.69 years, about eight months.
- Over three years: 3 × $1,800 − $1,250 = $4,150 net saving.
Enter your own figures in the switching payback calculator.
Now the same restaurant with a lease. Suppose the current terminals are on a non-cancellable lease with 24 payments of $55 left, which must be paid even if the restaurant stops using them: 24 × $55 = $1,320 more. Net cost becomes $2,570 and payback stretches to about 1.43 years. Still positive over three years ($2,830), but less attractive.
Using your exit rights under the Code
Under the revised Code of Conduct for the Payment Card Industry in Canada (in effect since 30 October 2024):
- If your processor raises a fee, adds a new one, or does not pass on a network fee reduction in full, you can cancel without penalty within 70 days of the effective date.
- If the processor did not give the required 30 to 60 days' notice, you can cancel without penalty at any time.
- After you give notice, the processor must send cancellation documents within 5 business days; cancellation takes effect on your requested date if obligations such as returning equipment are met and at least 30 days have passed since you submitted the documents.
- Scheduled increases already set in the agreement (such as the end of a promotion) are excluded.
Check your recent notices. See merchant rights under the Code and contract length and early termination fees.
Before you switch: ask your current processor
Many merchants get a better price by asking. Bring your effective rate and a competing quote on the same volume. Ask about:
- lowering the markup or removing fixed fees;
- moving from flat or tiered to interchange-plus;
- passing through the small business interchange reduction if you are eligible; see the 2024 reduction;
- waiving the termination fee or converting a rental.
Get any new terms in writing. A verbal promise does not change your agreement.
A step-by-step switch plan
- Collect three months of statements, your agreement and any equipment contracts.
- Calculate your current effective rate; see how to calculate your effective rate.
- Request quotes priced on your actual months; use the quote comparison checklist.
- Check the new provider: banks are regulated; for a non-bank payment service provider, search the Bank of Canada PSP registry; see RPAA registration checks.
- Work out the exit: notice period, non-renewal deadline (up to 45 days before renewal), termination fee or Code exit right, equipment return.
- Plan the overlap: set up and test the new terminals and deposits before closing the old account.
- Update recurring billing, stored card tokens (which may not transfer), online checkout, and your bank details for deposits.
- Close the old account in writing, return equipment with proof, and check the final statement.
When not to switch
- The saving is small and your current service is reliable.
- You are near a busy season and cannot risk disruption.
- Your remaining lease or termination fee eats most of the saving within your horizon.
- The new offer relies on an introductory rate that rises after a few months.
FAQ
How long does a switch take?
It depends on approval, hardware delivery and integration. Plan for overlap, and do not cancel the old account until the new one has deposited funds correctly.
Will switching affect my credit?
A processor may check your business and sometimes personal credit during approval. Ask before applying.
Can my old processor hold back funds when I leave?
Some agreements allow a reserve to cover future chargebacks and refunds after closure. Check your agreement; see settlement holds and reserves.
Sources
- Financial Consumer Agency of Canada — Code of Conduct exit and cancellation rights
- FCAC: Accepting card payments — merchant rights and complaints
- Bank of Canada — PSP registry under the Retail Payment Activities Act
- Department of Finance Canada — small business interchange reduction
