If you have an eCommerce website for your home-based business and are using a merchant account, will your account accommodate the holiday season? One of the ‘deep dark secrets’ of merchant accounts is the notorious ‘funds freeze’. When your account reaches a certain level of volume, did you know that your bank may freeze your funds?
The merchant account ‘funds freeze’ is one of the most dreaded things in all of eCommerce. It can literally put you out of business. This online article gives some horror stories and discusses the issue in more detail. The article makes it sound as though Merchant Banks do this arbitrarily, but there’s really no mystery to it. It’s also manageable as long you know what to look for and expect.
Merchant Banks will usually set a monthly limit on your account. This is part of their risk management process. When you exceed that monthly limit by a certain amount, the account can be reviewed for a ‘funds freeze’. The criteria for actually freezing funds varies from bank to bank, but it’s generally based on that monthly limit and other risk management criteria. Often they won’t even consider a funds freeze until the account has reached a large percentage over the limit.
If you already have a merchant account, be aware of what the monthly limit is and what will happen when you go over it. Find out what conditions might trigger a ‘funds freeze’. Call your merchant bank and have them answer these points for you. It is particularly important around the holiday season when sales can spike dramatically. If you think you may be approaching your monthly limit, ask your merchant bank for a temporary increase.
If you’re in the process of shopping for a merchant account, put this on your list of selection criteria. Expect that you’ll get some kind of monthly limit, but the important thing to understand is what happens when you exceed it.
Understanding your merchant account can keep you out of hot water this holiday season and beyond!