Your business may face extremely difficult situations when your merchant account is suddenly held, frozen or terminated. This can cause serious cash flow control problems and even a complete loss of ability to process payments from customers. In this article, PlutusPay will explain the situation of merchant accounts being held and frozen, how to handle and prevent them, as well as the common reasons why this happens, and how to respond when the account is completely terminated. full.
Source: Internet
What are Merchant account hold and Merchant account freeze?
Many businesses often confuse the concepts of "merchant account hold" with "merchant account freeze". However, there is a huge difference between them.
Merchant account hold (Merchant account has money temporarily held)
In the case of a merchant account hold, your supplier will temporarily hold the available funds instead of transferring them to the business bank account. Likewise, new payments will also be automatically held, meaning your business won't be able to access the transaction amount until the payment processor completes its investigation of your account. . Once the held funds are released, it will be transferred to your business's bank account.
Merchant account freeze (Merchant account has money frozen)
On the other hand, a frozen merchant account is a much more serious problem. When an account is frozen, not only are your funds held by the merchant account provider, but your business also loses the ability to process payments on its store. This means you won't be able to accept credit card payments from customers until your supplier completes an account investigation. Not only does this prevent you from controlling your cash flow, it also limits your ability to accept payments and affects customer relationships.
When a merchant account is detained or frozen, the payment processor (Payment Processor) can completely lock your account. If the provider decides they no longer want to continue providing payment processing services to your business, you will lose access to their platform. In this case, the provider may hold your funds for a maximum of 180 days to ensure that they have enough funds to handle refunds, chargebacks and other financial risks.
What are deposit delay and reserve account?
Merchant account providers use tools such as Deposit delay and Reserve account to minimize payment risks. However, these tools are not the result of a hold, freeze or lockout. They are very common in the industry, even for businesses with a history of excellent transaction processing.
Deposit Delay (Delay holding money)
Deposit delay occurs when payment processors automatically delay receiving funds from purchase transactions for a predetermined period of time. (Normally about 7 days.) This ensures that the payment processor has access to the funds if a risk of fraud or other payment issue arises.
Reserve Account
Meanwhile, reserve accounts are accounts that already have money in them. These accounts are used to cover the costs of refunds, returns and other payment disputes after the relevant merchant account has been locked. A reserve account is a requirement for high-risk merchant accounts due to the increasing risk. Reserve accounts minimize the processor's financial risk by setting aside a portion of your sales into a reserve account. So, if there are payment-related debts that you cannot pay, payment processors have a solution to help you back up.
Unlike holds, freezes and account locks, holdbacks and reserve accounts should not be affected by suspicious transactions or an increase in payment complaints. However, it is important that you understand the provisions on deferred holdings and reserve accounts to predict their impact on your business's cash flow.
How long can your Merchant account provider hold your funds?
So if your business is in a hold situation, or has its merchant account frozen, what is the maximum period that your money can be held? Unfortunately, most payment processors reserve the right to place a hold on the funds they complete to investigate your account. Since this time depends on the investigation process and is therefore unpredictable, you will have difficulty determining the timing and ability to reuse the funds or the ability to process payments for enterprise. However, you can help speed up the process by contacting the payment processor immediately and providing the information they request.
So what if the merchant account is terminated?
In case the merchant account is terminated, also known as the account is locked, the regulations will be slightly different. The merchant account provider may temporarily hold the amount after locking the account to ensure there is enough money to handle possible refunds or chargebacks. In most cases, after 180 days, your provider will refund the held amount, as this is long enough to reasonably eliminate the possibility of future financial losses.
Although this may seem unfair, it is written into the terms and conditions of your merchant account contract. When signing, you agree to have your money held and frozen if you do not comply with the specific terms and provisions of the contract. However, this problem does not only happen to merchant accounts. In fact, many payment providers even freeze accounts regularly due to their very low risk tolerance.
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