Bank officials can place a freeze on a merchant account if they suspect fraudulent activity on the account. During an account freeze, a bank temporarily halts a merchant’s payment processing abilities. If your merchant account is frozen, your business will be unable to use its merchant account, new credit card transactions you attempt to make will fail, and recent transactions pending credits to the account will not be authorized. To lower your chances of account freezes, take a few of the following precautions before opening a high-risk merchant account.
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You can expect a certain amount of chargebacks when you operate a business that accepts credit cards, but having too many chargebacks might cause your payment provider to freeze your merchant account. Following up on sales and establishing exceptional customer service helps prevent chargebacks. Having an easy refund policy eliminates the need for customers to start chargeback inquiries with their credit card issuers.
Ask what policies your bank or payment processor has in place for placing a freeze on funds. Some merchant processors will tell you ahead of time that if you process transactions beyond a certain amount, you will receive a hold on a certain percentage for a set length of time. An effective way to deal with this hold is to get approval for a higher volume than you need at the beginning stages of your business.
If your business has noticeable spikes in activity during certain times of the year, let your merchant processor know ahead of time so that you can avoid merchant account freezes. Also, if you receive an unusually large order, you should contact your provider before processing the transaction.
If you run multiple businesses, keep separate accounts for each business. Using one merchant account can send a red flag to the payment processor and can result in an account freeze or termination, especially when differences in transaction types are present.
Always be specific about products and services offered. The payment processor looks at the items and services you sell as a security measure. Notify your payment processor when you add items to your inventory or make changes in services offered. Define your product and services in broad terms when possible. Instead of promoting vitamins, promote supplements, as this term covers a wider variety of items. Similarly, consider promoting your home decor line, not simply lamps.
Having a high-risk merchant account makes you more likely to be subjected to merchant account freezes due to the nature of your business, a situation that can be understandably devastating. Once you have completed your due diligence and selected a merchant account provider that has experience with handling these types of accounts, your business can run smoothly, with few or no instances of merchant account freezes.