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Reasons for merchant account hold
If a merchant account is put on hold,
the account cannot be used for a period
it the investigations by the processing
bank are complete. The investigations
check if the agreement was breached and
makes a ruling whether to terminate or
reinstate the account.
There are several reasons as the why a
business is found violating the service
agreement. By finding these reasons, one
can try avoiding the mistakes which lead
to a merchant account being held.
Following are a few reasons which lead
to merchant account holds:
-
Excessive Chargebacks – the processing
banks take chargebacks very seriously.
Excessive chargebacks is one of the main
causes for merchant account closures and
holds. A general misconception with
regard to chargebacks is if a chargeback
is won it will not be charged against
the trader. However, this is not the
truth. If a merchant wins or loses a
chargeback case, the trader will face a
chargeback. Too many of these
chargebacks will cause merchant account
holds or closures. A superior offence is
the best possible defence against a
chargeback. A trader needs to be upbeat
to stop a chargeback before it occurs.
Also, it is necessary to have a
prevention plan for chargebacks.
-
Processing more than the declared
average ticket and processing volume –
While applying for merchant accounts, it
is necessary to declare the average
processing volume for each month and the
average ticket. Most of them forget
these figures after the start
processing, but it remains with the
processing banks. These 2 figures not
just a formality. In case processing is
carried out more than the average ticket
or declared volume, it could lead to
merchant account holds or termination of
merchant accounts.
-
Using merchant accounts for accepting
imbursements for other trades – A
merchant account is given to an
individual or a business for the use of
that unit only. It is strictly
prohibited to accept imbursements for
another business or person. Once this
behaviour is detected, it is a certainty
that the account will be terminated.
When suspicious behaviour is detected
during processing, it becomes another
lead cause for a merchant account being
held. It is tough to come out of this
situation as these are applied by
processing banks with no notice given to
a merchant. Merchants usually realise
that their merchant account is put on a
hold while charging credit cards or when
the sales made from credit cards are not
being deposited on the ledger of the
checking account. To prevent holds that
happen due to doubtful processing
activity, one has to avoid behaviours
which lead to the triggering of fraud
alerts. There are a few guidelines that
need to be followed while processing
transactions. If these are followed, the
triggering of alerts could be avoided.
If an account gets held, then there is
nothing much that can be done, expect
focusing on controlling the damage. It
is also advisable to seek legal help
from a lawyer who is a specialist in
bankcard laws.
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