A frozen deactivated or reviewed merchant account can halt any business, making it an essential issue for merchants to be aware of. Even though it is a common occurrence in the credit card processing industry, it is rarely discussed, leaving many merchants with unanswered questions when it occurs. This lack of information and understanding can aggravate the situation’s frustration.
This article will go over merchant account freezes, holds, and terminations in detail, assisting merchants in understanding why they happen and what needs to be done to resolve them, whether you’ve dealt with this problem or encountered it for the first time. We will try to understand the ways how to get your credit card processor to release your money quickly.
A merchant account hold or freeze can be a financially challenging experience for the merchant. However, it is critical to understand the reasons for this and the following steps to resolve the issue and resume normal operations.
Reasons your Payment Processor is Holding your Money
Payment processors are responsible for protecting your business and your customers by preventing fraudulent activity. To accomplish this, they may place a hold on your funds if they suspect any fraudulent activity on your account. This temporary hold can last anywhere from a few hours to several days.
Payment processors may review accounts regularly to ensure that transactions are legitimate and the account holder’s identity is verified. Depending on the complexity of the review process, this review may result in a temporary hold on your funds that may last a few days or longer.
Payment processors must comply with various regulations and laws, including anti-money laundering and know-your-customer regulations. If your account does not meet these criteria, your funds may be held until you provide the required documentation or resolve the issue.
Unfortunately, errors can occur in any payment processing system, causing your funds to be temporarily held. Processing errors can range from a minor technical glitch to a more complex problem, and the nature of the error determines the length of the hold on your funds.
Some businesses, such as gambling or adult entertainment, are considered high-risk, and payment processors may place holds on their funds. This ensures that the company abides by the laws and regulations governing high-risk activities.
Account Hold vs. Account Freeze
A frozen account is not the same as one that has been held. When a payment processor places a hold on a merchant account, only specific transactions are temporarily halted, allowing you to continue processing payments. This hold ensures a minimum reserve to cover potential chargeback and fraudulent expenses. Consider it a security deposit that you will receive back if your account is closed in good standing.
On the other hand, a frozen account halts all activities and holds funds while an investigation into suspected fraud or agreement violations is conducted. The merchant cannot process transactions or transfer any pending funds to their bank during this time. In essence, a freeze can prevent a business from accepting credit cards until it is proven otherwise.
Did you know your payment processor can unexpectedly freeze your account at any time? Many business owners fail to consider this harsh but unavoidable reality of having a merchant account. You may not realize it, but by agreeing to the terms and conditions of your contract, you have already signed away your right to access your money.
Look at these real-world applications from established payment gateways:
In accordance with the terms of service, Square reserves the right to withhold funds by delaying or suspending payouts or requiring the upkeep of a “Reserve.” If your Square account balance is too low, Square may try withdrawing money from other accounts.
If PayPal determines an excessive risk associated with a transaction, it may also freeze funds destined for your account. Internal and external factors play a role in the decision to withhold payments. You will be informed when a hold is placed and the funds appear unavailable.
First Data has the right to create a Reserve Account in an amount entirely up to them based on processing history and the risk of loss, as outlined in their standard Program Guide.
Money held in a merchant account is slanted in favor of the merchant account provider and not you.
Don’t lose hope; you can get back in charge of your money. The first order of business is to identify the underlying cause of the hold and take immediate measures to remove it.
Most of the time, funds are frozen because of chargebacks. It happens when a client informs their bank they did not permit a particular transaction. Since credit card fraud is so prevalent, the process of resolving a chargeback is tilted in favor of the cardholder.
Nonetheless, if you act quickly and under Visa and MasterCard‘s guidelines, you can dispute the chargeback and turn the tables. Submit all required paperwork promptly, and make sure it’s correct. If you win the dispute, your payment processor might give you the withheld money.
You may have broken your processor’s rules if a chargeback isn’t the problem. Sales of restricted items, false advertising, and exceeding daily transaction limits are all examples of typical violations. Contact your service provider as soon as possible to resolve the issue; you may not even be aware of the breach. You must act quickly, as any further delays will damage your reputation.
You shouldn’t anticipate a trouble-free journey even if you’re honest and play by the book. It’s possible that your processor won’t help you out, and they aren’t required to meet your deadlines. The courts should be viewed as a last resort in such situations. It may be your only shot at getting your money back, but hiring a lawyer is expensive and risky.
Your processor has lawyers and won’t back down from a legal battle. That’s why you need to back up your words with action. Make sure you have a lawyer willing to represent you for a reasonable fee before bringing up legal action. The cost of hiring a lawyer could easily cancel out any money you hope to recoup, making this option unworkable in some situations. If filing a lawsuit or initiating arbitration won’t yield a favorable financial outcome within 180 days, you’re better off just waiting it out.
The primary purpose of a contract in business is to ensure the safety of all parties. You may have the upper hand to nullify the contract and regain control of your funds if you can show that your processor has breached the agreement.
Keep an eye out for things that seem out of place, like sudden price increases, changes to the terms, or promises that aren’t kept. Try to get an email response from the company acknowledging your claims. Remember that you don’t need an unbreakable case to win, just enough evidence to convince your processor to settle out of court.
When you find yourself in a situation where your funds have been taken, it can be tempting to approach the problem with frustration and anger. However, adopting a cooperative and communicative demeanor can significantly increase the chances of having your money released. To demonstrate your willingness to comply, ensure that all necessary paperwork is completed and submitted on time.
Don’t hesitate to ask if any additional documentation can support your case. The key to resolving this matter is maintaining an open and transparent approach and earning the trust of the individuals handling your case. While it may be frustrating, it’s important to remember that your ultimate goal is to get your money back. Once that is achieved, you can report your provider and cancel your contract.
While it may seem like the odds are stacked against you, the truth is that you have the power to take control of your situation. You can force your processor to release your funds using intelligent tactics and diligent documentation. It’s important to understand that this process may not be easy. Still, with patience, persistence, and a bit of luck, you can overcome any obstacle and emerge victorious.
Don’t let anyone fool you into thinking you don’t have the upper hand in this situation. With the right approach, you can assert dominance and claim what is rightfully yours. So take a deep breath, roll up your sleeves, and get ready to fight for what you deserve. With determination and perseverance, the possibilities are endless, and the outcome is in your hands.