03 Oct Your Processor is Holding Your Funds—What Now?
Your business accepted a credit card payment, but now you’ve been notified that your processor is holding those funds for a risk review. What does that mean, and when will you see your money?
Having funds held is a frustrating and confusing situation. For some businesses, held funds can even cause serious cash flow issues. We’re here to provide insight on why funds are held, and insider tips to keep money flowing into your account.
Why were my funds held?
Held funding can almost always be traced back to information that was provided when a merchant account was initially opened.
When an application is submitted for a processing account, every business is asked to specify approximate annual sales volume, and average and high-ticket amounts. What many merchants don’t know is that this information is used to create a risk profile on your account. Risk profiles are ubiquitous in finance and are used in banking as well.
When approving (or not approving) an account, a processor will take the risk profile into consideration. For example, a business with an average ticket of $25,000 would be considered higher risk than a business with an average ticket of $25, and the higher risk business would likely need to provide additional supporting documentation (bank statements, profit and loss statements, etc.) to proceed with opening the processing account.
Once an account is approved, the sales volumes and ticket amounts listed on the application are used to set processing parameters. If you run a transaction or multiple transactions outside of your specified parameters, it can trigger a risk review.
What scenarios can lead to held funds?
Let’s consider a merchant account that was approved with an average ticket of $100, a high ticket of $500, and an annual sales volume of $120,000. For that merchant, here are a few scenarios that could flag a risk review:
1. The merchant processes a single transaction of $5,000. This is well outside their specified high-ticket amount of $500.
2. Over the course of three months, the merchant processes many transactions, all within the range of $100-$500. However, the volume of transactions adds up to $75,000. While the transactions themselves aren’t out of the ordinary, if the merchant continues to accept cards at this rate, their annual sales volume will be $300,000, far exceeding the specified annual sales volume of $120,000.
3. In an attempt to not exceed their high-ticket amount of $500, the merchant processes the same card four times for a $2,000 sale. Risk will flag transactions charged to the same card, even if they otherwise fall within processing parameters.
But it’s my money! Why is my processor holding it?
Struggling with a risk review can be maddening, but it’s important to understand that risk reviews are designed to protect not only the processor, but your business as well. If you accept a transaction well outside your processing parameters, there’s always a risk that said transaction will be charged back. And if a transaction is disputed and you can’t afford to foot the bill, it’s your processor that’s on the hook.
When funds are held for a risk review, your processor will investigate whether the transaction seems legitimate, and whether your business would be able to afford the chargeback if it’s not.
What can I do to PREVENT funds being held by risk?
Incorrect parameters mean your risk profile is inaccurate and your funds are more susceptible to being held by risk.
If you’re running a transaction that you know is outside your processing parameters, you should proactively send over invoices and bank statements to your processor. If you do this, the transaction may still be investigated by risk, but—if sufficient information was submitted to support the transaction—funding will usually only be delayed a day or two.
If you are fundamentally changing the way you do business, you will need to work with your processor to update your processing parameters. This typically takes the form of providing updated bank statements, invoices, etc., but this is something to look forward to, because it means your business is generating more income!
What should I do if my funds are ALREADY being held by risk?
If funds are being held by risk, your processor should contact you within standard funding times to let you know what information will be required to resolve the risk review. They may request a number of things—an invoice, correspondence between you and your customer, banks statements to verify sufficient funds are in the account to cover a chargeback, if one were to be initiated, etc. The more quickly you can provide supporting documentation, the more quickly the risk review can be resolved.
Once documentation has been provided, your processor will attempt to determine the legitimacy of the transaction(s). This might even mean contacting the cardholder’s issuing bank! Now, this next part is very important. If a transaction is rejected as not being legitimate, it will not be funded.
In this scenario, funds will be returned to the cardholder, and you will need to request a separate form of payment. If you’ve already delivered a product or service, this can be a problem. When accepting a transaction outside of your parameters, consider conducting a preliminary “risk review” of your own. Check ID, keep track of all correspondence, and forward relevant documentation to your processor.
If your funds are regularly being held by risk, step back and assess whether high-ticket transactions have become the norm for your business. If so, it might be time to update your processing parameters. And remember, while waiting on funds isn’t an ideal situation, it’s better than overextending the financial limits of your business.
Still have questions about risk profiles, processing parameters, or held funds? Contact BASYS Processing today. The processing industry is complicated, but we’re here to help.
BASYS Processing as a business partner
Does your current processor understand the unique struggles of your industry? Do they provide great rates and personal customer service? Are they offering solutions to grow your business and being proactive about helping you reduce risk and increase your savings?
BASYS Processing features:
• A friendly, live voice will answer the phone when you call; no automated phone systems
• In-house PCI Compliance team to walk you through the process step-by-step, improving security and reducing costs
• A knowledgeable Account Manager assigned to your business to support your needs
• Accept payments in person, over the phone or online
• Next-day funding options
About BASYS Processing
BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need. Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe & affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing.
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