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WHAT IS A HIGH RISK 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.

Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.