How To Deal With A Merchant Account On Hold Or Frozen

How To Deal With A Merchant Account On Hold Or Frozen

Most of the merchants don’t realize the importance of holds or freezes, both of which are for the protection of the merchant, and can exert financial stress on occurrence. Here’s how it all happens and what needs to be done, in case you get one.

Freeze And Hold: What Does It Mean?

When a suspicious activity occurs, the merchant account is frozen as a measure to protect you against fraud. During this phase, the credit card processing is provisionally shut down. A freeze allows the processor to look into the doubtful processing or activity to ensure everything is secured before the account is reactivated. It is essential to realize the kind of activities that can cause your account to be frozen or flagged. By proper communication with the processor and understanding of the root causes, most freezes can be easily avoided.

On the other hand, when some of the processing volume of the merchant is withheld and put into reserve fund, it is known as HOLD. The fund is taken as a security deposit or a guarantee against fraud and chargebacks. A hold can either be applied to individual transactions or a percentage of your volume, although it is not needed for every merchant account. It is imperative to realize any hold required by your account.

How to Deal With Holds And Freezes

Most of the holding and freezing is a result of suspicious activities and poor communication. Here are a few tips to avoid such a situation:

  • Before an oddly large transaction, always call your processor, so that the transaction goes smoothly without being flagged or put on hold. In case you are going to have a busy month, or looking forward to launch a new service or product, you should surely contact your processor.
  • If you are moving to a new industry, or expanding your business services, make sure to inform your processor. In case you do that without any prior information, your processor may suspect a suspicious activity, and you can get a chargeback for a service or item that is not on your provider list. In such a situation, your merchant account may be reviewed and may be put on hold or frozen.
  • In order to be eligible for reasonable fees and rates, it can be enticing to misrepresent your services or business. This is highly risky, since your account can be terminated, on the reason of falsification. If you classify your business as high risk, having a high risk account can be more reasonable and stable than a regular one. This is due to the fact that a payment processing company will expect more complex problems with your transactions.
  • Any account can be kept on hold or frozen, if there’s a large number of chargebacks. This primarily happens because the provider may be doubtful that you are accepting some fraudulent transactions. Sudden chargebacks in succession can lead to freezing of accounts and the need for reserve fund. In order to avoid this, make sure there are very few chargebacks in a month.