Have you ever have had your funds withheld? We understand what a frustration that can be. It certainly is disappointing when you have completed a large transaction and you are expecting your bank balance to be boosted the next day. While we do understand your frustration, many times the delays can be avoided by you, the merchant. Three things can be devastating to a merchant: Withheld funds, process freezes or, the worst, termination of your merchant account. We will explain the main reasons why funds are held or why accounts are frozen as well as tips for avoiding these situations and keeping your cash flowing and your business on solid footing.
A hold on funds means that some or all of your deposits are held temporarily or permanently depending on the situation. The most common cause of funds being held is a transaction that either exceeds your maximum transaction amount or appears to be very suspicious in nature. The best way to avoid your funds being held up is to call your processor before you complete a large, out-of-the-ordinary transaction. In some cases, the bank might see the same credit card being used over and over for abnormal purchases. This isn’t within your control or your processor’s control but provides the bank with time to contact the owner of the card to protect the cardholder. While this may irritate you, it is in the best interest of the bank.
Exceeding Your Transaction Limit
Because the bank basically advances money to you on a short-term basis, they have a vested interest in each transaction. Most Chosen Payments merchants receive overnight funding from First Data, our Acquiring Bank. First Data is then reimbursed by the bank that issued your customer’s credit card. When you applied for a merchant account, you completed an application that specified what your Average Transaction amount is as well as what your Highest Transaction amount might be. These numbers are used to determine the credit worthiness of the merchant. In other words, your ability to pay back money that might be advanced to you on behalf of the card issuing bank. If you said the largest transaction you would ever complete would be $5,000 and you attempt to run a card for $8,000, the transaction will cause a red flag because you said you would never transact more than $5,000. This places the bank at a higher risk than what you are approved for.
Other Reasons for Holding Funds
In the event you are facing a large chargeback, the Acquiring Bank will likely check your bank account to make sure you have a sufficient balance to cover the chargeback until it is resolved in your favor or the cardholders. If you don’t have a sufficient balance, the bank will take it from your next transactions. There is no notice given for these types of situations as there likely isn’t time to do so. Thank bank is going to protect itself from sustaining a loss. Also, if you have had a succession of chargebacks that the bank has had difficulty collecting on, you may be placed on a “rolling reserve” plan. This means the bank will take a percentage of your sales every day and place it in a “reserve” account to cover future chargebacks. Every day, some of those funds will be returned to the merchant but there will always be funds held in reserve for merchants with a high number of chargebacks in a limited time period.
Call Your Processor First
In many cases, we can make sure that your one-time sale of $8,000 goes off without a hitch. We can tell you what information we might need in advance. Sometimes this includes contracts, invoices, more information about your customer and other details related to the transaction. Just maintain communications with your credit card processor to avoid unexpected hassles.