In the decade and a half that I've been doing credit card processing, nothing upsets a business owner more than when you "hold" their credit card deposits. What I learned very quickly is that a good offense is better than a good defense. If you setup a merchant account correctly up front, it mitigates many of the reasons (but not all) as to why your credit card deposits might be held. Here are just three reasons why credit card processors might hold your credit card deposits:
1. An Inexperienced Merchant Services Rep Didn't Tell The Truth About Your Average Ticket To Their Processor - Salespeople come in all shapes and sizes and some are more unethical than others. Time and time again, I ask potential clients to show me their original agreement that they opened their merchant accounts with. I can't tell you how many times I've seen a $1,000 average ticket business listed on these agreements with a $100.00 average ticket. The merchant services rep is usually trying to get a quick sale done (usually to hit their quota) and in the process, they lie to the underwriter at their processor about the actual average ticket so they can avoid any kind of risk paperwork. What is risk paperwork? It is where a business owner (due to a high average ticket) may have to provide bank statements, audited financial statements or business tax returns if they have a higher average ticket. Wouldn't you want to provide this upfront rather than have a processor hold your credit card deposits down the road unexpectedly? And usually the hold happens when you need the money the most: You just ran payroll or you just paid all of your vendors right before a federal holiday and now the banks are closed. Nothing will upset a business more than this scenario.
2. You Or One Of Your Employees Ran A Very Large Transaction That Isn't Typical For Your Business - Sometimes you can't help that you get a large catering order or a large up front purchase but it's always better to call your merchant services rep BEFORE you run a very large charge that isn't typical on a day to day basis for your business. Years ago, I had a Nail Salon that had a $50 average ticket. I saw that her account had been notated with a hold. I called and spoke to a Risk supervisor and was told that this nail salon had run a $5,000 transaction. And remember, Risk Departments at processors are not just there to protect the processor, but they are also there to protect business owners from accepting fraudulent credit cards as well. I immediately called my client and she told me that she had run her brother's credit card for $5,000 because he wanted to "invest" and become "partners" with her at the salon. I immediately told her to void/refund the transaction as this was not allowed by the Card Brands (Visa/MC/Discover/Amex). Had I not been proactive in this situation, this business owner could have been setting herself up for a giant problem down the road. You see, if her brother had decided to chargeback on that transaction because the partnership went sour, he could get his $5,000 back pretty easily from his card issuing bank and then she would have to pay back the $5,000 to her processor. This is not a situation you want to be in as a business owner.
3. Your Method of Processing Has Changed Or Wasn't Disclosed to the Processor by Your Merchant Services Rep - If you started out swiping all of your credit card transactions and then you start keying them all in because you are now taking all of your payments as recurring billing or online, this can cause a red flag to your processor. Or it could be that your merchant services rep told their processor that you would be swiping all of your cards at 100% but in actuality you have always keyed in all of your credit card transactions. Once again, a merchant services rep might do this just so they can get your account through underwriting quickly just to make a fast sale or it could be because of a lack of knowledge. One of the very first questions I ask a new business is: How will you be accepting credit cards? Keyed, swiped or both? Will you be doing any recurring billing? What about online ordering? Are you a service-based business where you take payments in advance from your customers? If so, how many days or months before that service is provided? All the answers to these questions tell me how to setup your merchant account properly. If someone just "guesses" the answers to these questions, you can be sure that your money will be held at some point in time.
The bottom line is that there are dozens of reasons why your credit card deposits can be held by your processor but there are many things that you can do to prevent this from happening. My advice? Hire a seasoned merchant services rep to handle your account, ask a lot of questions about how your account is being setup, and lastly, be honest about your business even if it means you have to provide additional paperwork up-front to open your merchant account.
At Ark, it would be our pleasure to provide you with a complimentary detailed proposal for our services. We ask a lot of questions to get to know your business, therefore, your account will be setup correctly. DeeAnn Bennett is the President of Ark Payment Solutions and a 14+ year veteran of the merchant services industry. You can reach DeeAnn at 702-257-8295 OR info@arkpaymentsolutions.com.
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