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PROTECTING ASSETS USING PHARMACY MERCHANT ACCOUNT RESERVES

All businesses have some risk associated with them and this is where the importance of merchant reserves lies. When things turn awry and not as per plans, financial difficulties will arise. To safeguard themselves from such untoward happenings, banks and merchant account providers have come up with the concept if merchant reserves wherein the merchants’ liability is covered. This reserve fund does not bear any interest. This fund acts like security money when events become unfavourable and the merchant is at a loss. This does not mean that the merchant is doubted by the banks and account providers. The fund will help to fulfil financial obligations of the merchant during unexpected expenditures, charge backs that cannot be handled and decrease in the demand for the goods produced which will affect the sales and other unforeseen circumstances. Some merchants may not know about this fund and in such a case, the banks may request for deposits. For security reasons, sometimes even the processed funds of merchants can be withheld. Such situations can happen with companies that are new to business.

Reserve funds are to be paid while the merchant account is processed and it will be specified in the agreement itself. The option of rolling reserve is also in practice and this involves charging a particular percentage from the sales transactions. The value of the reserve fund depends on many factors like the projected sales, actual sales, charge backs and return % that is generally associated with specific industries. It is common to increase reserve amounts if the banks or account providers based on the foreseen risks. When the agreement between the parties terminate, the merchant will get back the unused reserve amount.

A word on charge backs – a charge back situation can arise at a time when a customer does not get satisfied after making a purchase using credit card and so requests for refund. The responsibility of the transaction lies with the merchant. When there is a failure in this, charge back results. This is one situation but there are other instances when charge backs can happen. The situation becomes bad when the merchant has several charge backs in his name, say bout one percent of the sales. In such a case, the merchant account will be cancelled.

The other factor that the banks shun is fraud. Consider the case when the merchant was not able to cover charge backs because of bankruptcy. At such times, the banks would not want to lose out financially and this is when the reserve fund gains need and importance.

One must understand the fact that uncertainties are part and parcel of business and it is difficult to assess future economic conditions as well. In addition to enjoying the facilities of merchant accounts, it is mandatory to plan for such events and be prepared for it since processing banks will be affected when the merchant gets affected by any means. A reserve fund will take care of such a situation and provide the much needed relief. 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.