Picture this. You’re a small business who has been preparing for what is traditionally a busy season or eventful time. Maybe it’s a holiday weekend, or a major event is coming to town, but you know this is a time frame when you will have lots of business. You’ve got your “Sale” banner up, the store is looking great, and everything is in order except… your merchant account was shut down! Panic ensues – your sales are going to sink faster than the Titanic if you aren’t able to accept credit card payments.
What causes a processor to shut down a merchant account? There are a number of reasons that this can happen.
First and quite possibly the most common reason is that a merchant has too many chargebacks. Having a large number of transactions that are refunded or disputed can lead a processor to categorize you as high risk, obviously resulting in having a high risk merchant account and costlier fees. In general and if it’s at all possible, try to keep the number of chargebacks at 1% or less of your total charges. Look at a chargeback management program such as Verifi’s Cardholder Dispute Resolution Network to help reduce the number of chargebacks. Bankcard Brokers offers this program and it’s well worth checking out if your business is having trouble with chargebacks. Also, one of Bankcard Brokers’ ETA – CPP certified merchant account consultants can help guide you with best practices to avoid costly and frustrating chargebacks.
Another reason a merchant account could be shut down is if there are too many forced transactions. This type of transaction is usually keyed into a system manually, and then “forced ” through if some of the card data is invalid. Often times a keyed in transaction causes some of the electronic information found on the card will not be captured in the transaction. Fraudulent transactions are often the result of keyed in transactions. Credit card numbers are often stolen without the actual card being taken.
If your business accepts payments online, you are probably going to have a certain number of keyed in transactions. To prevent your merchant account from being flagged for excessive keyed in transactions, be up front and as honest as possible when asked about what percentage of your sales you expect to be keyed in. It is better for your processor to know up front what types of transactions will be coming through. There will be an allotted percentage of allowed forced transactions but definitely work with your processor to figure out the best option.
A high-risk credit card user can possibly exceed his or her credit amount in a given month and as such, the credit card issuer usually takes action to prevent the user from charging anything else on the card. Merchant accounts are similar to this – you’re approved for a certain amount of volume each month in transactions. If you go over the amount of dollar volume you’ve been given, and this is another way your account may get shut down. To avoid this, stay within your allowable monthly volume limit. If you feel that you need to raise your monthly volume limit, give your processor a call or send an email and let them know. Communication is key here – you don’t want your payment processor taking an action such as freezing your account simply because you didn’t communicate your true business need.
A “bait and switch” of sorts is yet another way your merchant account can be shut down, and this also has the potential to shut you down for a long time while you fight legal battles. This happens when you apply for a merchant account to sell a particular product or service, but instead are selling something either high risk or even illegal. For example, if you submit your application for a massage parlor or a strip club (which often means you’ll have a high risk merchant account anyway), but are really running an escort service, chances are you’re going to get shut down for good. In addition, the major card brands such as Visa and MasterCard could blacklist you, and this could affect your ability to get merchant accounts for legitimate businesses – ever. Bottom line, sell exactly what you have identified in your application, even if it means you have a high risk merchant account with some higher costs. It is always better to be upfront and honest about what you sell or do and avoid even the appearance of fraud or deception which can carry some serious penalties.
So, you’ve found this article a little too late and your merchant account has been shut down. What now? How do you get back up and running? There are a number of things you can do to get rolling again.
First, find out what the reason was for the termination. It will be helpful to know, plus you will need this information when you apply for a new merchant account.
Second, find out if the account was “MATCHed.” This stands for Member Alert to Control High Risk Merchants, and is basically a database that captures information on merchant accounts that have been canceled.
Third, start looking for a new provider, and recognize that you’ll probably need to look for one that handles high-risk merchant accounts. Also, don’t try to hide the fact that you had a merchant account canceled. This information is easily discover-able and not being honest about it will just make the situation worse. When looking for a new provider in High Risk merchant services it is incredibly important to find a provider with many years of experience and excellent consumer ratings. There are a lot of high risk merchant account providers who have less than desirable service levels and results.
Bankcard Brokers specializes in high-risk processing and merchant accounts, with over 12 years of experience, and values having an honest relationship with its merchants. We’ll work with you to get you the best rates for high risk processing, and will help you every step of the way in getting you back to business!