6 Ways To Avoid Funding Holds With Square

6 Ways To Avoid Funding Holds With Square

Square is a payment processing company that enables businesses to process credit card payments quickly and easily. It is a convenient solution for many small businesses, but some merchants have reported funding holds with the platform.

A funding hold means that your funds are temporarily unavailable, which can be a significant inconvenience for businesses that rely on their funds to operate. In this article, we will take a closer look at funding holds with Square and provide 6 ways to avoid funding holds with Square.

How Does Square Funding Hold Work

Square Payments
image source: Square Payments

When a customer files a chargeback with their issuing bank, Square’s payment processing system takes over to handle the chargeback. If the merchant has sufficient funds in their account, the bank notifies Square, and those funds are held in reserve until the dispute is resolved. Square will deduct the disputed amount from the merchant’s linked bank account if the funds are insufficient.

The Square Dispute Resolution squad aims to reach out to the vendor to acquire additional details regarding the transaction. Square forwards any specific requests from the issuer to the merchant, and for the dispute to be resolved in their favor, you must supply thorough and accurate information. The merchant may settle the dispute by refunding the money to the customer.

The same stringent time frame binds chargebacks processed through Square as any other chargeback; hence, merchants must respond promptly to Square’s notifications. Square’s Disputes Dashboard in the Point of Sale app can help with this by providing merchants with an overview of their disputes, including details and status updates.

Square may request information from merchants during the dispute resolution process, similar to what is typically asked in other chargeback representation circumstances. They may include copies of receipts, invoices, email correspondence, proof of delivery, and the text of the purchase terms and conditions. It’s critical for merchants to understand that they can only contest a chargeback through a first representation. Square will not file a second arbitration claim if the issuer agrees with the cardholder. To increase their chances of winning the dispute, merchants must provide all necessary information and respond promptly.

6 Ways To Avoid Funding Holds With Square

avoiding funding holds with square

Here are a few ways to avoid when holding funds with your Square account.

Keep Your Account Information Up-to-Date

One of the biggest reasons funding holds occur with Square is outdated account information. Square uses this information to verify your identity and your business’s validity, which helps protect against fraud and other financial crimes.

Keeping your contact information, business information, and bank account information up-to-date is crucial to avoid triggering a funding hold. You can easily update this information anytime through your Square account’s “Settings” section.

Process Transactions Consistently

Another factor that can lead to funding holds is inconsistent transaction processing. Square may flag irregular activity and suspect fraudulent behavior or an illegitimate business if transactions are processed sporadically.

To avoid these red flags, it’s important to process transactions consistently. Establishing a regular activity pattern will help reduce the likelihood of a funding hold. If you need to process a large number of transactions in a short period, make sure to notify Square in advance to avoid any unnecessary delays.

Avoid Processing High-Risk Transactions

Square considers some transactions to be high-risk, such as those significantly more significant than your average transaction amount or transactions made in a high-risk industry. If you process these types of transactions, it can trigger a funding hold, as Square may be concerned about the potential for fraud or other financial crimes.

If possible, avoid high-risk processing transactions. If you must process them, be sure to take steps to mitigate the risk by obtaining proper documentation or obtaining pre-authorization from Square.

Follow Square’s Policies and Procedures

Square takes client protection against financial crimes and fraud very seriously. As a result, they have put in place stringent policies and procedures to ensure the safety and security of financial transactions conducted on their platform.

It is critical that all users follow these policies, as failure to do so may result in a funding hold being placed on your account. To avoid this, it is best to strictly adhere to Square’s policies and procedures, including best practices for transaction processing. To reduce the risk of fraud, obtain proper documentation and pre-authorization for high-risk transactions.

Furthermore, it is critical to stay up to date on any changes or updates to Square’s policies and procedures, as these changes may impact your account’s status. Adhering to these guidelines can help ensure that your Square transactions are secure and free of potential financial crimes.

Respond Promptly to Square’s Requests

If Square has any concerns or suspicions regarding your business’s legitimacy or the possibility of fraud, they may put a hold on your funding. To prevent this from happening and to ensure a smooth experience with Square, it’s essential to be responsive to any requests for information from Square.

This could include providing documentation or any other information that they require. To stay on top of any requests from Square, check your account’s “Notifications” section regularly. By doing so, you can stay informed about any actions or information Square needs from you and respond promptly to avoid any potential funding holds.

Monitor Your Square Account Regularly

Finally, it’s essential to monitor your Square account regularly. This will help you identify any potential issues or red flags that may trigger a funding hold and also allow you to address any problems quickly to reduce the risk of a hold.

This may include monitoring your transactions for unusual activity, reviewing your account information for accuracy, and checking for any notifications or alerts from Square. You can proactively avoid funding holds by staying informed about your account status.


Funding holds with Square can be a significant inconvenience for businesses that rely on their funds to operate. However, there are several steps you can take to reduce the risk of a funding hold.

By keeping your account information up-to-date, processing transactions consistently, avoiding high-risk transactions, following Square’s policies and procedures, responding promptly to Square’s requests, and monitoring your account regularly, you can help to prevent funding holds and maintain access to your funds. With these 6 Ways To Avoid Funding Holds With Square we provided, you can keep your business running smoothly and focus on growing your business with Square.

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