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WHAT IS MERCHANT ACCOUNT HOLD?
A very important topic with regard to
processing of credit cards is merchant
account hold. This is regarded as one
among the most devastating factors for
the finance of a business. Here, a
trader’s merchant account is frozen by
the processing bank. If this occurs, a
trader will not be able to access
his/her accounts and the funds received
from open authorities will be seized for
a time period which will not be
disclosed. Hence, new transactions made
from credit cards cannot be accepted and
the profits from newly processed
transactions won’t be deposited for
several days.
A merchant account hold is the cause
behind several businesses to face loses.
In these cases, usually the merchant
appears as a victim of merchant account
holds. But, there is always another side
to each coin. It is important to know
why a processing bank holds a merchant
account. Also, a trader should have
knowledge on how to avoid holds in
merchant accounts.
A suspect of fraud is often the reason
for merchant account service providers
to put merchant accounts on hold.
Typically, the service providers act as
a defense against the fraud faced by the
merchants. The primary defense against
defrauding card holders is the service
providers in some situations.
The frauds that occur while processing
merchant accounts if a cause for concern
for the service providers and is the
main reason why they take action against
merchant account holders. The service
providers monitor their clients
continually to detect signs for merchant
account abuse. If fraudulent activity is
detected, then the offending account
goes under a hold until investigations
are conducted to find the cause of
problem. After the investigations are
complete, a merchant account is either
released or the offending account is
terminated.
After the completion of investigations,
if a merchant account is terminated,
there may be additional actions which
could lead to the closure of the
account. If a deliberate fraud or misuse
is detected, then the offending trader’s
name will be included in Terminal
Merchant File or TMF. The trader could
face criminal charges or fines filed
against him. These systems for detecting
fraud help in fighting against
fraudulent activities; however, these
systems are not perfect.
In some cases, innocent traders have
their merchant accounts held and
flagged. This could result in
devastating results. However, it is
important to understand the reasons why
a service provider put a hold on
merchant accounts. The primary reason is
when the term agreements in the service
agreement are broken. The other reason
is when suspicious behavior is detected
while processing takes place.
For opening merchant accounts, it is
necessary for traders to sing the
service agreement. In this agreement,
one finds the outlines for fees, rules,
and the limitations with regard to the
ticket size and processing volume for a
merchant account. If a trade breaks the
provisions in the service agreement, a
processing bank has to power to either
put a merchant account on hold or
terminate the account. |
