Advertiser Disclosure

How To Avoid Merchant Account Holds, Freezes, And Terminations

  • 44 comments
  • Updated on:
Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.
Melissa Johnson

Melissa Johnson

Melissa Johnson has been writing about payment processing and mobile payments since 2014, and has been quoted in articles for Credit Karma and The Next Web, among others. She graduated from The University of Kansas in 2010 with bachelor's degrees in English and journalism.
Leave a comment

44 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Val

    Ive had a hold on my account due to a credit card since 2015 withoutny any resolution. Ive even asked just take the money so I can start fresh yet they do not. Its been 5 years now…how long will they hold this money without taking it or releasing it?

      Jessica Dinsmore

      Hi Val,

      We’d need a bit more info about your situation to try to decipher what might’ve happened here. If you’d like to email us at service@merchantmaverick.com with more specifics, we’ll do our best to help.

        Amy

        Hi Jessica
        Are you still answering comments on here? I hope I get notified if you do.
        My questions:
        1- If using PayPal or really any processor, is it safer to send an invoice to customers if they’re purchasing a coaching session that is $200 or more rather than a buy now button on ones site?
        2- or following up that buy now button with a short agreement once the sale goes through? That requires their signature with some wording about what they’ll receive and not receive (I.e. results are based on client implementing action)
        3- I recently had a dispute go through with PayPal (I’m leaving them now as the experience was disappointing in how they handled this) that a person purchased a ticket to an event and didn’t show and then filled a chargeback with PayPal checking off service not received. I provided PayPal with a copy of my webpage that states no refunds as well as the customer receipt that states no refunds as well and they still sided with my customer. I then filed an appeal and forwarded emails from the client where she stated she was stuck in a meeting and was going to be late (didn’t think I would have to provide this) yet again they still stated insufficient evidence and refunded the client. Any idea what I could do loving forward to avoid this? I don’t know what other information I can provide when I was clear every step of the way that there are no refunds and obviously that would include if one is a no show.

          Jessica Dinsmore

          Hi Amy,

          I would say for high value transactions ($200 or above) an invoice might be safer because you can attach a contract and send it directly to the customer who clicks a link and agrees to pay. With an online sale, all of that would need to be disclosed on the product listing page before the purchase.

          Generally speaking it’s quite difficult for merchants to win chargebacks. This article on Preventing and Winning Chargebacks has lot’s of helpful advice for you, including chargeback prevention. Good luck to you!

            John Haskin

            Hello,

            My MSP decided that the products my eCommerce site sells are against their Acceptable Use policy this week. Their policy is long, and cleanly broken down in to easily read categories, and I of course read it before listing anything, and have read it against since the freeze. Nothing I sell is on their list of prohibited item.

            I have mentioned this, and their response is that they are able to add to it anytime, and my continue use of their services means I consent to their policy. That’s great, but this new “policy” is in their heads, and not written down for their clients to see for themselves.

            I have even asked what item(s) caused the freeze, and they refuse to tell me, simply stating it is against their policy to disclose what it is that led to the freeze..as if it is a secret. Sure, it’s a secret because now they are going to earn interest off the $37,674 USD they have frozen of mine for the next 83 days.

            I don’t know what options I have, if any. There is nothing in my store that other clients of theirs don’t also offer. Yes, my products aren’t sold by all (millions) of their clients, but I have searched enough to see that other clients sell the same thing.

            They offered me advice, telling me to switch to a High Risk MSP, with higher credit card processing rates of course..but after about 5 minutes of research I discovered this other company is owned by them..and the Support Rep who recommended the other option had the nerve to go as far as sending me a URL with his Reseller ID in it, so he could make his affiliate commission.

            I have chat logs, emailed by this MSP to prove everything I have said. Does anything I’ve said sound illegal on their part?

              Jessica Dinsmore

              Hi John,

              That all sounds very frustrating, to say the least! I think your questions would be best answered by a lawyer because unfortunately our expertise about contract law is very limited and we don’t want to offer advice that we may not be qualified to give. That said, we’d recommend switching to one of our top rated providers. Best of luck to you!

                victor

                I have a problem 🙁 I work in a small business cellphone store and I had a customer who often comes buy iphones from us hes stripe was not working so since I know the customer I took the bad decision to force the sale two months later were receiving a 1900$ chargeback due to fraudlaent transaction and I’m about to lose my job 🙁 I just had my first daughter I’m going thru hell right now 🙁

                  Valerie

                  Hi Melissa, my husband and I are just starting our ecomm shopify store. Starting as a general store and then picking our niche. If we don’t know exactly how much we will be bringing in monthly since we are new how do you suggest we make that estimate guess without getting flagged if we are over or under our expected amount?

                    Melissa Johnson

                    Hi, Valerie!

                    Unless your processor specifically has a monthly required minimum and assesses fees if you don’t meet that amount, you generally don’t need to worry about going below expectations. Since you’re going with Shopify, my assumption is that you’ll also use Shopify Payments, which is powered by Stripe. Stripe has no monthly minimums. Your biggest concern will be enabling whatever fraud protection tools you can and making sure you minimize your chargebacks. From my research into Stripe, it seems that fraudulent transactions and chargebacks seem to cause the most account stability problems. Some merchants also seem to stumble a bit when they start to approach the threshold for 1099-k reporting ($20,000 in sales AND more than 200 transactions), at which point you might be asked to provide additional information.

                    So in this circumstance I think it’s definitely worthwhile to overestimate than to underestimate. However, building an online business takes time. So be reasonable about expectations, especially at the start. I would say that $5,000/month is probably a very respectable over-estimate, and if your business grows steadily over time, you shouldn’t have too much to worry about no matter which processor you go with.

                      Scott

                      I have a problem and I hope somebody can help me I have an account with cash app one day my grandmother tries to send me $52 and they refunded back to a card and freeze both of our accounts and I have over $800 available in my account that’s frozen can anybody help me to try to unfreeze my account and be able to access my available funds?

                        Jessica Dinsmore

                        Hi Scott,

                        So sorry you’re going through this! Unfortunately you will have to wait for your account to be unfrozen. I’d suggest contacting them directly to figure out what happened and hopefully resolve your issue quickly. Good luck to you!

                          Annie

                          Merchant processors are thieves and I cannot wait until the feds eye turns to them and their incredibly shady practices. They have almost bankrupt us several times and I know several businesses that have had to close down because of their practice. Horrific. Criminal. Their day will come and I hope they pay dearly for what they’ve done to so many honest and small businesses.

                            Waheed

                            The day will come. Be patient. If me as a merchant is a victim of any fraudulent act, then there is an actor (thief). I should not be responsible about other people actions and there should be some kind of a law to protect small businesses from such circumstances.

                            Annie, I hope your business will pick up again soon! and everyone in your position too.

                            All my best,

                              gary

                              We are going out of business and when our processor found out they asked us to update the software on their credit card machine, which we did. They implied our funds would be released once that was completed. Now they are telling us they may hold our $25,000 for up to 2 years!!! Of course we were stunned to say the least. We plan to be in business for several more months. We have stopped using that machine. Any suggestions?

                              Gary

                                Melissa Johnson

                                Hi, Gary!

                                Before I get into my response, I need so say that there’s a lot of information we don’t have concerning your business, your contract, and your processor. That makes it hard for us to give a really good precise recommendation on how to handle this. I will say that a 2-year hold is exorbitant and you should absolutely not just accept it. So here are some options for you:

                                1. Contact customer service and demand an explanation. This is usually the first step in dealing with any problem. See if they can tell you exactly why they’re holding $25,000 for two years when the standard chargeback window is 180 days. It might take a while and it could be very frustrating, but at least when you move onto other options, you can say you tried to go through the processor. Keep records of when you called and who you talked to, and anything that was promised and in what time frame it was promised.

                                2. File a complaint with the BBB. In our experience, this is usually a good way to get a processor’s attention when the customer service reps are giving you the runaround. Being able to document your interactions with the processor in your complaint will be helpful, too.

                                If you are sure you want to stop using your current processor’s services, you should be aware that they can and will still charge you based on the terms of your contract. If you have a monthly minimum fee and you don’t meet that minimum, it could mean even higher penalties than your usual monthly costs. If you have an equipment lease, they are often non-cancellable. If that is the case with yours, you’ll be stuck paying it out for the duration of the contract even if you aren’t using it.

                                If you still want a credit card processing option, you might consider Square. The caveat is that Square isn’t right for every type of business and you can still encounter holds. But there’s no contract, and no monthly fees. If Square is a good fit for your business, it should get you through the rest of your operating months.

                                I hope this helps you get started. I wish you all the best of luck in dealing with this problem!

                                  Mike

                                  Melissa – this was great and very informative. you have the ability to greatly simplify concepts for better understanding. Thank you!

                                    samuel green

                                    i got a question. i’m from Atlanta & i come up to NY from March to September to sell homeade items that my household makes. i’ve been doing it for 4 years now and potential customers asked me did i accept cards and i didn’t until August of 2017. well I started off with Square and they deactivated my account due to me not being able to show any license or inventory and i tried explaining what was going on several times but they never understood so they deactivated my account with over $1,500 in my available balance and now they have told me i have to wait 90 days to get my money. i gave it a break for a week and decided to just go to Paypal Here. i told them what i was doing over the phone when i set up the account so that the same thing wouldn’t happen again and it did, this time it was $3,500! is this legally correct? i’m really in a sticky situation and I really need this money.

                                      Jessica Dinsmore

                                      Samuel,

                                      Apologies for the delay. Honestly, I’m not sure why both processors would hold your funds and terminate your account. They must’ve seen something that they did not like. From a legal standpoint, they can do whatever they want because chances are the terms were laid out in your agreement with both Square and Paypal.

                                        Stuart Wright

                                        Hello,

                                        Wonderful information you have provided. In respect to holds and freezes, is there a processor that is better to work with to prevent this situation? Looking to move to a new merchant processor and don’t need any issues like you mention here.

                                        Thanks you…………..Stuart Wright

                                          This comment refers to an earlier version of this post and may be outdated.

                                          Tom S

                                          I have a couple of questions for you. I have been involved with 3 Merchant accounts during the months of 9/2016-12/2016. Each continued to raise the reserve and then terminated the contract because my partner and I took to long to get them the reserve funds. None of the Merchant accounts processed any of the credit cards and expected us to pay them the reserve in advance. I thought they usually took the reserve monies out of the charges and then paid the merchant. That was not the case with all 3 of these Third Party processors. Between the 3 of them thy are holding 50K of our monies and repeated calls to them to return our monies fall on deaf ears. What can be done to get them to return our monies? Will we have to take legal action to get them to cooperate? Meanwhile I have 200K of unprocessed charges and the business or what’s left of it is in serious jeopardy. Please provide your thoughts and is this typical for the industry?

                                            This comment refers to an earlier version of this post and may be outdated.

                                            Jessica Dinsmore

                                            Tom, we’d recommend speaking with a lawyer. Best of luck to you.

                                              This comment refers to an earlier version of this post and may be outdated.

                                              ANDRE JACKSON

                                              What Happens when they start an Investigation, shut down your Merchant account because you went over your monthly amount(suspect fraud)?….they do not have any batch funds but hold your money with your institution….you have never had any chargebacks….will the money be returned?

                                                This comment refers to an earlier version of this post and may be outdated.

                                                lisa

                                                What are your thoughts on keeping a mobile payments account separate from everything else? I was also taught a best practice is to keep mobile as their own lane.

                                                  This comment refers to an earlier version of this post and may be outdated.

                                                  Hocem R.

                                                  I really liked the article but would like a bit more specific advice.
                                                  I was considering using super swipe payments for a high risk business and would really like to know if you have prior experience with them? superswipepay.com is there website in case you can’t find it.

                                                  Thank you in advance. I would also appreciate any good suggestion for a pharma business.

                                                    This comment refers to an earlier version of this post and may be outdated.

                                                    Chloe Bahal

                                                    Hi Hocem,

                                                    For high risk, I would recommend taking a look at Durango Merchant Services, Payline Data, and Instabill.

                                                      This comment refers to an earlier version of this post and may be outdated.

                                                      Anne

                                                      Any experience with a nonprofit accepting donations? We use fund accounting and need to capture the fund that should receive the gifts in Quickbooks. Or should we go through our merchant account at QGiv?

                                                        This comment refers to an earlier version of this post and may be outdated.

                                                        Chloe Bahal

                                                        Hi Anne,
                                                        Thanks for your question. I’m familiar with nonprofits accepting donations, but I’m not sure exactly what you’re asking. If you’re wondering how to handle fund accounting in QuickBooks, you can find a guide here. I hope this helps but if you need more information, can you explain your situation–and your query–in a bit more detail? Thanks!

                                                          This comment refers to an earlier version of this post and may be outdated.

                                                          Yalamanchi

                                                          Worst of all merchant services company, if you call customer service with your statement, the person want statement number. You end up spending reading all account numbers. Most CSR’S answering the phone has no clue about account number on the statement. Unbelievable bureaucracy. I sold my business, I cannot make them to close account. I have tried five times so for. Stay away from these hard core bureaucrats. Shame on there management. They think as a small business person you can not do any thing

                                                            This comment refers to an earlier version of this post and may be outdated.

                                                            Khrystian Green

                                                            Ok my friend deposited 2,500 into my account Tuesday then Wednesday he back door and deposit 3,000 into my account I took the whole 3,000 out my account and everything was good until my ball called me and said come back we need you to sign for it , I’ve never had to sign anything just the deposit slip for getting the money out that’s it I’m honestly scared cause I’ve never been put in the theft category but he sent the money to me how am I suppose to know it’s a scam or so I trust him so that’s just completely out of my mind that he would set me up I need answers on what tobe aware of when I go to the bank in the morning ?? Please I need to know now

                                                              This comment refers to an earlier version of this post and may be outdated.

                                                              alex kerr

                                                              What if someone has multiple merchant accounts under other people names? Can it be a reason for termination? I know that people have multiple MIDs to avoid monthly limits with auto-billing

                                                                This comment refers to an earlier version of this post and may be outdated.

                                                                Ereka

                                                                Hi, I hope someone can help me because I a thoroughly frustrated. I have been working for this online company for over a year and our payments are processed through this company. I have yet to be paid and every time I call they give me a different excuse. First it was because they came under new ownership then it was jus an accounting error,then they had my bank account information wrong and now they keep giving me different days they sent my payment out and its direct deposited!! I have spoken to my boss and he keeps telling me that he has had problems with them in the past and he should go with a different company, but I’m like, where is my money? you are getting yours money, I just want the money I worked hard for. I have recurring subscribers to my site but no payments and I don’t know what I can do to rectify this.. What are my third party rites? We don’t seem to have many rights. I have had to loose my lights and phone for a while waiting for this money. I’m not able to work an outside job because of chronic pain so this is it for me. Please help me to get ideas what to do. One time I spoke to the company and they hung up on me then they deleted previous emails to my account telling me when they were sending out my money! This is clearly a crooked company. Or perhaps they do not care because they are getting paid. Clearly my boss doesn’t care because they are paying him on time.

                                                                  This comment refers to an earlier version of this post and may be outdated.

                                                                  Tom DeSimone

                                                                  Hi Ereka,

                                                                  It sounds like you don’t have a direct relationship with the payment processor, so unfortunately this falls out of my area of expertise. But I can tell you that the payment processor itself will never hold your funds for more than 180 days, usually not more than 90. It sounds like some other third party is failing to make the deposits. You probably have some kind of agreement or contract that outlines your rights, so you might want to refer to that to see what the standards for holding funds are. In these situations, the squeaky wheel gets the grease. So make complaints (the BBB is a good place to start), make a fuss, make phones calls. A year is way to long to wait to get paid. I hope they get this fixed for you ASAP. Let me know the name of the company that has the money and I’ll let you know if there’s anything else I can think of to do.

                                                                    This comment refers to an earlier version of this post and may be outdated.

                                                                    chaney

                                                                    hi I need to know is there a way to accept cards and not have a middle man holding my funds cause im thru with paypal and these merchant provider don’t sound like an help cause I refuse to ship product without clear payment thanks

                                                                      This comment refers to an earlier version of this post and may be outdated.

                                                                      Tova

                                                                      Ahmad,

                                                                      Can Amazon hold my money forever, that is what they are telling me.
                                                                      I had the payment account for 4 years and I left 8300.00 dollars in the account for 3 years without touching it, I tried to close my account first, 2 months ago and I received an email asking me the reason I want to close my account, then 3 days later I received another email that say we will close your account and we will hold your funds indefinitely. This account was not used the past 3 years. How can I get my money back from them or If you know any attorney that can help me to get my funds back from these MAFIA(Amazon) corp. They do not even respond to my emails.

                                                                      Thanks,

                                                                      Tova

                                                                        This comment refers to an earlier version of this post and may be outdated.

                                                                        Tom DeSimone

                                                                        Hi Tova,

                                                                        It is certainly not legal for the company to hold the funds indefinitely. But they may want to thoroughly confirm that you are who you say you are before releasing the funds, especially given that the funds sat in the account for so long. Reach out to customer service by phone. I think that there is a part of the story that you have not been provided with yet. If the payments are old, then the funds have already cleared. So there is no risk of chargebacks. But if they cannot properly confirm your identity and the account is close, Amazon will have to surrender the fund to your state’s Unclaimed Funds office and you will have to submit the proper paperwork there in order to get your money.

                                                                          This comment refers to an earlier version of this post and may be outdated.

                                                                          Megan Denyer

                                                                          From a business perspective, reducing credit card fraud starts with the human element – specifically – with comprehensive security awareness training. While companies often spend untold sums of money on the latest and greatest hardware and software products, they fail to recognize the importance of training and educating employees on security issues, threats, and best practices. There are a multitude of programs available online, many for free, so there’s really no excuse. Want to stay in business, then protect cardholder data by training your employees on important security issues and threats – it’s really that simple.
                                                                          From a personal perspective, individuals just need to be very careful as to who they give their cardholder data information to, and watch out for fraudulent charges, which means reviewing monthly statements and looking for any anomalies

                                                                            This comment refers to an earlier version of this post and may be outdated.

                                                                            Frank Murch

                                                                            As the owner of a small business I need vendors that help me grow. I have been “caught” twice selling more than my limit. This limits the growth of a company and it very disruptive. It also tends to happen when cash flow is an issue (because I purchase more to support big orders and then I don’t get paid because my sales are not funded). It is the mark of an arrogant and unsupportive industry. Credit card processers are truly sharks. They are expensive, service is poor and they tend to be unreliable. Then they hurt their customers when they are needed the most – terrible industry. Despicable

                                                                              This comment refers to an earlier version of this post and may be outdated.

                                                                              Rob

                                                                              Hi
                                                                              My name is Robert. What I have not seen on any of these posts is anything about merchants protecting themselves from the processors.
                                                                              I have a friend that had 49k in a reserve account. The processor files bankruptcy and after a long drawn out ordeal of almost 2 years, received 3900.00 settlement from the bankruptcy court. Later it was found out that they were being sued and had to file for bankruptcy protection.

                                                                              Oh how the world work….

                                                                              Thanks,

                                                                              Rob

                                                                                This comment refers to an earlier version of this post and may be outdated.

                                                                                Tom DeSimone

                                                                                Hi Rob,

                                                                                That’s a nightmare. The best way to avoid that sort of thing is to (a) avoid having funds held in a reserve account if at all possible (sometimes it’s unavoidable), and more importantly (b) work with the most reliable merchant services provider possible. All of our favorite processors are highly, highly, HIGHLY unlikely to go under. They are reliable companies with long track records that we have carefully vetted. Working with a reliable partner is the best way to minimize risk of this kind of catastrophe.

                                                                                  This comment refers to an earlier version of this post and may be outdated.

                                                                                  Tom

                                                                                  Hi there Amad,

                                                                                  I am curious what the maximum amount of time a financial institution is allowed to withhold once funds for? As a business owner i hear all the time of 30,60 & 90 day accounts. But i have never heard of funds having the right to be withheld for 180 days (6 months). Surely this is excessive and against the law as these funds are still my or my customers funds.

                                                                                  Please can you help shed some light on this

                                                                                  Many thanks
                                                                                  Tom

                                                                                    This comment refers to an earlier version of this post and may be outdated.

                                                                                    Tom DeSimone

                                                                                    Hi Tom,

                                                                                    The answer is complicated. I’m not familiar with the actual laws surrounding this, but I am familiar with the industry standards – and I am working on the assumption that the industry standards are not illegal. But, that said, laws and contract terms certainly may vary from state to state, and definitely vary from country to country. Here’s what I know:

                                                                                    In most processing contracts, you’ll see a section which states that the processor has the right to withhold funds if they have reasonable suspicion that chargebacks may take place. They usually reserve the right to withhold the funds in reserve until (a) the chargeback takes place, at which point the funds would still be withheld but not in the reserve account, (b) enough time has passed that a chargeback is no longer legally possible, or (c) they have otherwise determined that a chargeback will not take place.

                                                                                    In general, a customer has a maximum 120 days before chargeback rights are forfeited, although that number could be less depending on the reason for the chargeback. In most cases, this is 120 calendar days from the date the transaction took place, 180 days for international transactions. But in the case of faulty/defective merchandise, it is 120 days after noticing the problem – a maximum of 540 days after the original transaction! This only applies to certain type of chargebacks, but it can happen. Plus don’t forget to tack on the month or two that the actual chargeback arbitration will take should a chargeback occur.

                                                                                    The real answer is: it depends. It depends on the type of goods or service, the reason for the chargeback, and the exact language of the processing contract. It also depends on which card network the transaction was processed through.

                                                                                    Hope this helps!
                                                                                    TD

                                                                                      This comment refers to an earlier version of this post and may be outdated.

                                                                                      sam

                                                                                      Hi I need a reliable merchant account any advice ??

                                                                                        This comment refers to an earlier version of this post and may be outdated.

                                                                                        Tom DeSimone

                                                                                        Hi Sam,

                                                                                        Check out our comparison chart to see some of our favorite providers! Any questions, don’t hesitate to ask.

                                                                                        Good luck,
                                                                                        Tom

                                                                                          This comment refers to an earlier version of this post and may be outdated.

                                                                                          Alex

                                                                                          Hi,

                                                                                          Good tips and well put.

                                                                                          I have a problem i hope you can help me with:

                                                                                          I have a business that is less than a year old and opened an account with First Data when first started operating.
                                                                                          When first started the business we were doing mostly retail sales, but quickly moved to doing mostly wholesale sales and carrying more products.
                                                                                          Last August, after a very busy month, i noticed that there is a batch of about $10,000 that is not clearing into our account.
                                                                                          A short phone call to a First data rep revealed to us that due to the high volume in sales, they decided to look into our account, when they then noticed that we are not selling only kitchen accessories as we filled out in the original application, but also selling key chains and novelty items which we started selling short time before, and never knew that we need to notify First Data that we are selling.
                                                                                          They said that the account will be terminated, and the funds will be held until their investigation will be over, probably after 6 months.
                                                                                          In addition to that we were asked to send them all the invoices that we had created to our customers, and all the shipping receipts as well to prove that the customers actually received the goods.
                                                                                          Not only that, but they had us paying ‘investigation fees’ in the amount of $25 per page(!) that they requested us to send them!
                                                                                          After we sent them everything that they wanted, they agreed to release $5000 to our account, while keeping another $5000 for 6 months.
                                                                                          They also sent us a termination letter that says that we will need to pay for the investigation and cancellation fees.

                                                                                          My questions are:

                                                                                          – Are these investigation fees normal? why should i pay for their investigation and for cancellation if they initiated them and not me?

                                                                                          -If i am planing to open a new merchant account with a different company (lets say ‘Leaders’) – should i be worried from that this incident will show on our credit report? If that is the case, should i form a new company and get a new EIN number before applying for an account with a different processor?

                                                                                          Thanks,

                                                                                          Alex.

                                                                                            This comment refers to an earlier version of this post and may be outdated.

                                                                                          Leave a Reply

                                                                                          Your email address will not be published. Required fields are marked *

                                                                                          Your Review

                                                                                          Comment moderation is enabled. Your comment may take some time to appear.
                                                                                          Please read the "User Review and Comment Policy" before posting.

                                                                                          Share