Receiving a termination notice from your merchant account provider can be terrifying and frustrating. In some cases, you may have seen it coming – especially if you were under recent bank scrutiny. At other times, merchant account termination can come out of the blue. Neither scenario is one you want to find yourself in.
If your business recently had its’ merchant account terminated, the first thing to do is take a deep breath. The next step is to identify the course of action moving forward. Working methodically through your available options will provide a payment solution for your business. Don’t stress and take your time when selecting a new payment model.
Merchant Account Risk
Before we highlight the necessary steps to surviving a merchant account shut down, there is an important fact to consider. A merchant account, contrary to most people’s opinion, isn’t a depository account – it’s a line of credit.
The process starts when a customer provides payment via the electronic card network. The card network, in turn, extends credit to your business by paying on behalf of the cardholder. It is only after the cardholder receives a monthly statement; they can make payment to their issuing bank.
Being a line of credit, high-risk merchant accounts are particularly vulnerable. Examples include fraudulent activity by data thieves, chargebacks could exceed the recommended 1% monthly ratio, or the business could fail. In most cases, if a payment processor notices an elevated risk from a particular merchant, the standard action is to close the merchant account.
Reasons Why Merchant Accounts are Terminated
1. Suspicious Merchant Activity
This is characterized by a merchant breaching the Terms and Conditions with the processor. For instance, depositing transactions on behalf of another business or processing payments for another purpose than agreed upon.
Excessive forced credit card refunds by cardholders also lead to the termination of merchant accounts. In this case, the term excessive is subjective. Every processor or bank has a different definition depending on your business model. On average, a merchant account service provider won’t terminate your account as long as your chargeback ratio does not exceed 1% monthly.
The presence of fraudulent activity in your business automatically qualifies your merchant account for termination. Fraud can entail misuse of credit card details, overbilling customers, or not delivering goods or services.
Next Steps After a Merchant Account Shutdown
Now that you know the reasons a merchant account can be closed, what do you do if you find yourself shutdown? Though it can be a significant setback, it is not the end of the road for you as a business owner. Here are some steps to take to get back on track.
1. Find Out What Caused the Termination
You need to know why your merchant account was terminated so that you can avoid making the same pattern in the future. Ask a lot of questions regarding the termination. Don’t forget to ask for a written statement; you will need it when applying for a new account.
2. See If Your Business has been MATCHed
There is an official list containing businesses whose merchant accounts have been terminated. The database is known as the MATCH List (Member Alert to Control High-Risk Merchants). Processors are usually asked to report all terminated accounts to this database. You, therefore, need to confirm if you are on the list. Typically once on the MATCH List, the payment options available to you as business owner dwindle substantially.
3. Get Your Statements
Ensure you have on hand the past 6-12 months of processing statements. Your new merchant provider will review the statements to locate the best processing solution available to your business.
4. Adhere to Policies and Be Honest
Establish a good working relationship with your new acquirer – be honest and upfront about your current situation. Don’t forget to also adhere to the terms set with your new service provider. Take a look at the reasons your account was terminated and create new business policies and procedures to prevent it from happening in the future.
Having your merchant account terminated can be a huge step back, but there is always light at the end of the tunnel. With the above five tips, you can get your business back to its feet and survive a merchant account termination. For over a decade, Payment Savvy has provided payment acceptance to a variety of high-risk merchants. If you need help finding a suitable payment solution for your business, reach out to us today to review your options.