Why Payment Processors Sometimes Hold Funds
Nothing is more frustrating for a business owner than to find out that his or her payment has been held back. Even though it might be scary, sometimes holding back your merchant account doesn’t necessarily mean you did anything wrong.
The payment processing company controls the financial risks. Therefore, if there are some changes or questions regarding your business, the company can hold back your money while performing a review. Most of the time, this is just a temporary measure and can be solved with proper documentation.
Common Reasons Funds Are Placed on Hold
An unexpected spike in transaction volumes is one of the most frequent causes for funding holds. In case your business regularly processes $10,000 a month and all of a sudden starts processing $50,000 per month, the payment processor will likely want to check whether the transaction is legitimate.
A high number of chargebacks, too many refunds, large transactions, new types of goods and services offered by your business can be another cause for funding holds. The lack of necessary documentation or the old bank account information can also result in a delay of funds.
What You Should Do If It Happens
If your merchant account is put on hold for any reason, do not worry; however, the best way to resolve the problem is to react to all requests by your payment processor as soon as possible.
The list of necessary documents may include invoices, receipts, proof of delivery, banking statements, identification documents or some other information related to your business. It will help the process to go faster when you provide the necessary data at once.
It is also important to keep in touch with your payment provider during the entire process.
How to Reduce the Risk of Future Holds
The simplest solution to avoiding funding holds is to keep your payment provider aware of what is going on in your company. For instance, when you plan a major promotion, an expansion into new product lines, or an anticipated surge in sales, inform your service provider beforehand.
Staying away from high chargeback rates, processing transactions regularly, and updating information regarding your business will also decrease the chances of future reviews.
Communication Is Your Best Protection
While an account hold may create inconveniences, it is normally temporary, and by gaining an insight into why it occurs and working hand in hand with your payments processor, you will be able to deal with it easily and maintain a smooth flow of business operations.
Good communication and account management can prevent unforeseen disruptions from happening.
