High Risk Merchant Accounts – MATCH List and Frozen Funds
Absolutely nothing can bring your company to a shrieking stop quite like a misstep in your credit card processing flow.
Whether your funds are withheld, a freeze is placed on your processing capability, or the complete termination of your account. These scenarios will be an annoyance at best and ravaging at worst for you.
We’re here to discuss with you the primary reasons why processors hold funds, freeze accounts, or terminate an account entirely. We’ll also look at methods to prevent this from happening so you can keep your cash flowing and your business on strong footing.
One Of The Most Common Merchant Problems: Withheld Funds
Going from the least serious to the most severe thing a processor can do to affect your cash flow. Let’s first discuss what it suggests when there is a freeze on your funds. Keep in mind that your processor has nothing to gain to start with this choice. If you’ve never had an issue with a transaction in the past, it’s likely that they will initially hold your funds till their team can evaluate a transaction. They might perhaps ask for additional documents from you.
Explaining Withheld Funds (Hold). A freeze on your funds occurs when a processor withholds a percentage of your merchant’s processing volume. Your processor keeps it in a separate account as a protective procedure in case of chargebacks, refunds, or scams. Holds can be applied to specific transactions (generally high-value or really suspicious ones) or to a total amount of your sales.
Rolling Reserve to Hedge High Risk Merchant Accounts MATCH List and Frozen Funds
A rolling reserve takes place when a processor chooses to continue holding a set percentage of your day-to-day processing volume as a security measure. After a pre-determined number of days, your funds are released on an ongoing basis. This occurs over and over (hence the term rolling reserve). A minimum reserve needs a specific sum to be held for an amount of time. With a minimum reserve, funds will not be disbursed to you until the reserve fund is filled.
Can Your Processor Legally Hold Your Money? Well the short answer is yes. The more detailed one is that you agreed to let them hold your money when you signed your contract. In some cases, various provisions can be negotiated out of an agreement before you sign. However you likely won’t have the ability to negotiate the funding hold/reserve provisions out of your processing contract. Holding funds on particular out-of-the-ordinary activities is basic industry practice. After all, the bank is basically fronting you the cash based on the credit card charges. If there is a chance that they may not become able to recoup the money due to scams, chargeback, or refunds, the bank will hold your funds a little longer for security before releasing it to you.
To provide you with an idea of the normal agreement language that enables a payment processor to put a hold on your funds, we looked through the agreements of a number of processors. We pulled the Square and Stripe agreements to take a look at the typical merchant account service providers’ language. The practice of funding holds and reserve accounts are always there in the contract.
Square Payment Processing
Square has several arrangements that govern different elements of its relationship with its merchants as can be viewed here. It is Square who determines whether or not to establish a reserve, the amount in the reserve, and the ways to money the reserve are all at Square’s sole discretion. By signing up to do business with Square, you need to accept the terms above, which gives Square the right to keep funds from you.
While Square’s language above reads extreme and provides the business power over your organization’s funds, it is relatively typical of the market. For instance, Stripe likewise has comparable language in its standard user contract. The most pertinent part remains in Section C, Paragraph 8.
The Worst-Case Scenario For Merchants: Account Termination and MATCH List. An account termination is pretty obvious. Commonly, a processor will terminate an account if they deem a merchant to be in clear offense of their terms, or if the merchant has misrepresented their business in the application procedure. Again, taking a look at some of the normal contracts, account terminations are pretty much at the processor’s discretion. Stripe and Square will also place you on the dreaded MATCH List.
How To Prevent A Cash Flow Crisis With Your Payment Processor:
Having a continuous cash flow is pretty essential to running an effective company. It would be a nightmare if, one day, that cash flow is all of a sudden disrupted without warning. We understand that your credit card processor does have the power to entirely freeze your capital, however we likewise have a pretty good idea of how to prevent this from happening. No matter which kind of processor you pick, the best steps to prevent holds, freezes, or terminations are relatively universal, and we summarize them listed below.
Pick the Right Type of Processor. Merchant Account contracts are as diverse and varied as payment processors themselves. However, in the end, what you need to understand is that there are 2 type of arrangements: direct arrangements and third-party arrangements. Aside from these alternatives, merchants in specific industries may require a specialized kind of direct agreement called a high-risk merchant account. We’ll take a look at all three of these choices to assist you choose which is right for you prior to you set out to get any sort of account.
High-Risk Merchant Accounts High-risk merchant accounts are just a specific type of direct agreement. Some of the processors that provide basic merchant accounts will provide high-risk accounts also. Other merchant services providers like FinTechMerchantAccounts specialize entirely in high-risk accounts.
What makes you a likely candidate for a high-risk account?
Being categorized as “high-risk” isn’t a personal insult; it seldom has anything to do with your certifications as a merchant or company owner. We have provided links of our popular post on high-risk merchants for a far more comprehensive list of industries usually categorized as high-risk on the bottom of the page.
High-risk accounts use a lot more stability to high-risk markets. In exchange, you’re going to pay higher rates than you would with a conventional merchant account or a third-party processor. You may need a minimum reserve or a rolling reserve as a condition to open the account.
What To Do If You Encounter A Hold, Freeze, Or Termination. It’s rather possible that you may not know you’re dealing with a hold, a freeze, or a termination up until you attempt to process a sale and it will not go through. Or your checking account statement does not match your sales records because your funds are being held in a reserve fund.
Stripe, Square and PayPal do not provide advance notice; they’ll simply take what procedures they deem appropriate and inform you later or not at all.
That’s why it’s important that you keep a close eye on your merchant account and save any correspondence between you and your processor. Read your regular monthly statements and ensure you’re not violating the regards to your merchant agreement.
Let’s say the worst does occur: Your account is frozen. What now?
Do not call and scream at your processor’s merchant support. It’s not that person’s fault and they can be extremely useful if you stay calm and acceptable while asking for their assistance navigating to the best department/person who can resolve the concern for you.
As soon as you are directed to the appropriate department, continue to remain calm and ask for assistance to solve the circumstance. Be mentally ready that there may not be much you can do. Provide any documents that your processor requests (invoices, order, etc.) as rapidly as you can. Let everything run its course.
Either your account will be reinstated or it will not, and you’ll deal with your termination. The records your processor might request, might feel invasive to you. However they’re just trying to ensure your company has the money to cover the sales in case a chargeback takes place down the road. If you do have a healthy cash flow, a few of this information might even be used to increase your processing limits for future sales and avoids holds. Providing your processor the details they ask you for isn’t a bad thing.
You can utilize small loans to cover operating expenditures in the meantime if your funds are frozen. Specifically, you might be able to get a working capital loan, a swing loan or perhaps a line of credit. Make sure that you are clear on the guidelines and what you must do to prevent any future issues if you are lucky enough that your account is reinstated.
If your merchant account is shut off, you’ll need to look for a new processor.
In all honesty, you might discover that to be difficult. Processing freezes and terminations look bad on your record. In the case of a termination, your name will be added to the terminated merchant file (TMF) and Member Alert To Control High-risk (MATCH).This lets other processors know that you have had your account blacklisted, which makes it harder to get another merchant account.
High Risk Merchant Accounts – MATCH List and Frozen Funds
At this point you will need to find a good high risk merchant account provider. FinTechMerchantAccounts can help you with this the way we have helped many other. Call us at 617-918-7235 to discuss your options. We also welcome you to ask a question in the comments section are engage with our virtual assistant.
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