Your merchant account funnels payment from credit cards directly to your business bank account. This makes the process of receiving payment online quite seamless. But this also presents some unique challenges. One of the major challenges of an online merchant account is handling chargebacks. If after making payment, a card transaction is discovered to be fraudulent, the merchant account provider has to repay the funds immediately to cover the chargeback. This means the merchant provider is always in a risky position regarding any transaction that goes on on their platform.
To mitigate these risks, your merchant provider reserves a right to terminate your merchant account and hold on to funds if it is deemed to pose an undue risk. There are several reasons why this sudden termination may occur. It is important that you know and understand these reasons so that you can learn to avoid them. Knowing why a sudden termination may occur will also help you understand the right course of action if your merchant account is terminated. Some of the reasons why a sudden account termination may occur include:
l Excessive chargebacks: merchant account providers may terminate your account if there are too many chargebacks against your business. Generally, you should try to keep your chargeback ratio to a maximum of 0.9% of your total transactions. Any amount higher than this and you risk having your account terminated.
l Fraud suspicions: if your account is being suspected or reported as fraudulent, your account may be terminated.
l A sharp increase in transaction volume: while it is normal for transaction volume to increase steadily overtime a sharp rise in activities on your merchant account might cause your account to get flagged.
l Your industry is no longer being served by the provider: if businesses in your industry have been placed on a watchlist and are no longer being served by the merchant account provider, your account may be terminated even without a direct infringement on your part.
l Violations of card network regulations: online transaction processing depends on the collaborative efforts of various platforms including your card issuer. If reports of a card network violation on your account is sent to the account provider, your services may be terminated.
l PCI-DSS non-compliance: merchant account providers take security breaches seriously. Non-compliance with security specifications may lead to a termination of your account.
Your merchant account may be terminated for any of these reasons as it increases the credit risk for your account provider. Typically, you will be sent a notice when this occurs. You must ask questions about the reasons for your account termination. In many cases, the issue can be resolved easily. But in some cases, your account may be added to the Member Alert to Control High Risk. The MATCH list is a sort of blacklist and this may make it difficult to enter into a merchant agreement in the future. Hence, it is vital to identify the actions that may put your account at risk and take steps to avoid them entirely.