Merchant Account Hold – What it Is, Why It’s Done & How to Avoid It

An extremely binance accounts buy credit card processing is that of merchant account holds. One of the most financially devastating things that can happen to a business is for a processing bank to freeze its merchant account. If this happens to your merchant account, you won’t be able to access the account and your funds from open authorizations will be held without deposit for an undisclosed period of time. This means that you can’t accept new credit card transactions and the income from recently processed transactions will not be deposited for days, weeks or longer.

Merchant account holds are behind many of the horror stories that you may have read about online or heard from friends. Merchants are often portrayed as the victim in these stories, but there are two sides to every coin. In this article I’ll discuss why processing banks hold merchant accounts, how you can avoid having this happen to you and what you can do if a hold is put on your account.

Suspected fraud is often the basis for a merchant service provider putting a hold on a merchant account. In a typical situation providers are the second line of defense against credit card fraud behind the merchant. In an atypical situation where someone opens a merchant account with the intention of using it to defraud cardholders, providers become the first line of defense against fraud.

Merchant processing fraud is a big problem that merchant service providers are obligated to take action against. Providers continually monitor all of their business clients for signs that a merchant account is being abused. If indications of fraudulent activity are detected, the offending merchant account will be held until an investigation can be conducted to determine what triggered the alarm. Such investigations result in the release of the merchant account hold or the termination of the offending account.

If an investigation ends with the termination of a merchant account, additional actions may follow depending on the reason for the account closure. In the case of deliberate misuse or fraud, the offending merchant may be added to the terminated merchant file (TMF), face fines or even have criminal charges brought against them. These fraud detection systems serve a vital purpose in the fight against fraud but they’re not perfect.

Sometimes innocent merchants have their accounts flagged and held; the affects of which can prove devastating.
There are two basic reasons that cause a merchant service provider to apply a hold on a merchant account. I’ll list them here and then discuss each in detail in the paragraphs that follow. The first reason is breaking terms agreed upon in the merchant service agreement. The second is suspicious processing behavior.

To open a merchant account a business must sign a merchant service agreement. This agreement outlines the rules, fees, and limitations in respect to processing volume and average ticket size for the merchant account. If a business breaks any of the provisions in their merchant service agreement, the processing bank can hold or even terminate their account. In the case of an account being held, it will be unusable for as long as it takes the processing bank to investigate the breach of the agreement and make a ruling on whether or not to reinstate or terminate the account.

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