The Merchant’s Guide To Instant Credit Card Processing, Instant Deposits, & Getting Your Funds Fast
Every business owner knows that controlling cash flow is essential to survival. For most businesses, incoming cash flow includes credit and debit card sales, but a lot of behind-the-scenes work happens between that initial swipe or dip of the card and the money finally being deposited into your account. Though much of this money transfer is automated these days, delays still happen. How, then, can you get your money as fast as possible despite the standard wait times?
Below, we give some tips on how to get your funds quickly and recommend some reputable processors who can process your payments fast. Read on to find out more!
Other Featured Options:
- PayPal: Be default, the funds available in your PayPal account almost as soon as the transaction is complete.
- Host Merchant Services: Host Merchant Services offers next day funding because it takes advantage of the batching times of the ACH system.
- National Processing: Next-day funding is available, although the National Processing website does not get into specifics about who qualifies.
Read more below to learn why we chose these options.
Why Being Able To Accept Credit Card Payments Instantly Doesn't Mean Instant Funding
f you’ve ever shopped around for a payment card processor for your business, you’ve probably visited more than a few websites that promise Instant Approval! or No-Hassle Setup! These promises often come with the additional assurance that you can Get Your Money Right Away! Other websites promise the same fast funding with the more subdued term Instant Funding.
Are these the same thing? Does this mean you can sign up and get the money from your first credit card sales on the same day? No.
Being instantly approved/signed up to take payment card sales and getting the money from your first credit/debit card sale are two completely different processes. The approval/sign-up part involves checking the creditworthiness of your business as well as, very often, your personal creditworthiness. Getting the money from your payment card sales involves the mechanics of bank-to-bank money transfers.
When it comes to instant funding, there is a place where the two concepts meet. We will cover that later, but first, let’s quickly talk about the process of being approved to take payment cards and how money is transferred between banks.
Getting Your Business Approved To Accept Payment Cards
When you set your business up to take payment cards, you’ll typically sign up with either a third-party processor like Square or a merchant account provider like Bank of America (or whoever your business banks with…because you didn’t have time to research). While they both process payment cards, they have different business models. Both will assess the risk of doing business with you–i.e. decide whether you have a stable business that’s unlikely to go bankrupt, whether your customers tend to dispute their payment card charges, or if your business sells “high risk” merchandise or services, etc. The difference is that third-party processors typically assess that risk after you’ve signed up while merchant account providers assess that risk before you sign up.
This is why “instant approval” might be possible with a third-party processor but not with a merchant account provider.
How Long Does It Take To Transfer Money To Your Account?
As to how payment card proceeds get to your business’ bank account, this has more to do with the way–and the time it takes–banks to transfer money to each other. When a credit or debit card is used to pay for goods or services, the money must be moved from the card holder’s bank (the issuing bank) to your bank (the acquiring bank). The process depends on a number of factors and deadlines and can take anywhere from a few hours to three to five days. After that, for up to several months, there is a possibility that the credit card holder might dispute the charges and force you to pay back the disputed charge.
The only way to speed this process up is for someone–typically your processor–to front you the money for those few days. To get this service, you’ll typically have to pay an extra fee.
Does A Fast Merchant Account Or Instant Credit Card Processing Mean Reliability?
As already touched on above, a (reputable) merchant account provider will assess the risk of doing business with you before they approve you to take payment cards. A third-party processor, however, typically assesses that risk after you’ve signed up with them and have started to take payment cards through them.
As a result, with third-party processors, you can often get “instant approvals.” Your business’s ability to process payment cards, however, might be interrupted later, after they’ve assessed the risk of doing business with you. You might be required to establish a reserve account with the processor. They might even suddenly terminate their business relationship with you. In other words, processing with third-party processors means you might have to deal with an unstable/unreliable process. That’s not to say that every merchant who uses these services will have a problem — that’s simply not true. But almost any merchant could run into trouble.
With a merchant account provider, risk assessment is done upfront. You have to submit documents and be subject to credit checks, but your ability to take payment cards is less likely to be interrupted later. Unfortunately, due diligence takes time, so this translates to no instant approval. (Some good merchant account providers still move pretty fast, even if it’s not instant.)
If you see a merchant account provider that promises instant approval, be wary. They’re approving you without doing their due diligence first, so they’re working more like a third-party processor. If they decide later that your business doesn’t fit their desired risk profile, they might withhold money from your account or even suddenly terminate their business relationship with you.
So, instead of looking for instant approvals, our advice is to be patient and provide all the information upfront. It’s worth the wait for a reputable merchant account provider to get to know your business so they can properly assess their risk and underwrite the merchant account. However, that said, some businesses do very well with third-party processors. New businesses without an established history and just a small volume of sales can work with third-party processors; in fact, it’s often the most cost-effective solution to start out.
How Can Some Processors Offer Instant Deposit For Merchants?
As mentioned earlier, it takes three to five business days to transfer money between banks. After that, for at least a few months, there’s a possibility the cardholder could pull the payment back by disputing the charges. How, then, can some processors offer instant deposit to merchants? The short answer is that they front the business the money, knowing they’ll get it from the issuing bank eventually.
Most third-party processors can legitimately offer instant deposit because fronting money is baked into their business model. They take on the risk of chargebacks, but they’re quick to terminate their business relationship with you if the risk becomes too high for their comfort.
Some merchant account providers are also willing to front you the money from your payment cards proceeds, and they do this under the term “instant deposit” (or a similar term). You usually have to qualify as a good credit risk, and there are typically extra fees involved. So, if you absolutely must have your money right away, be sure you understand that you’ll be paying extra for this.
One word of caution about instant deposit: whether you process with a third-party processor or merchant account provider, your contract typically allows them to reach into any of your linked bank accounts and pull back the money already advanced to you. This might happen if, for example, your customer disputes the charges. So, in the case of instant deposit, the money might not be free and clear until up to several months after the payment card charges have been paid to you.
Lastly, be aware that same-day and next-day processing aren’t the same as instant processing. These types of funding take advantage of the mechanics of money transfer deadlines of the ACH Network.
Currently, banks within the US transfer money–including money from payment card transactions–to each other mostly via the ACH Network twice a day, in large batches. As long as you make the transfer cutoff (as of this writing, 10:30 a.m. ET and 2:45 p.m ET) and pay an extra fee, you can receive your money and be funded by your credit card sales on the same day, after the banks settle their transfers (as of this writing, 1:00 p.m. ET and 5:00 p.m. ET). Some processors can program your card processing machines to batch and transfer sales information before these daily deadlines (or the processor’s internal deadlines), so you can be funded within 24 hours.
If you are funded any faster than the ACH Network batching times, someone (probably your processor) is likely fronting you the money for a few hours to a few days. This is how “instant” funding is possible.
Why Do Payment Processors Withhold Funds From Merchants?
Sometimes, even after the standard three to five days of transit time, you still won’t get your funds. There might be several reasons for this.
Most often, funds are withheld to control risk. We have an article that explains everything in detail, but the quick summary is that some payment card usages and charges (e.g. a very large charge) can suggest fraud. Until a bank can verify that a transaction is legitimate or (in worst-case scenarios) the chargeback window has passed, they won’t want to release the money to you for you to spend at will. Similarly, if you operate a high-risk business, they will also want to hold the funds a little longer until they are sure that the charges won’t be disputed and pulled back. They might even establish a rolling reserve fund and only release the money after the reserve has been fully funded.
We also see complaints about withheld funds from merchants who have just set up their merchant accounts. Sometimes, the payout from the account is not consistent. Often, you’ll have to contact customer service to initiate payout from the merchant account to your business account. We’ve never seen a formal explanation from anyone, but it seems that this issue happens a lot, so we mention this here for you to be aware of this possible problem.
Lastly, sometimes, funds are withheld because the processor has interdepartmental communication issues. Layers of bureaucracy, poor software, and bad communication with back-end processors can all cause issues and ultimately delay payout to you.
Are you, then, completely helpless if you can’t get a quick payout of your funds? Not necessarily. Although there are limitations to what you can do because you can’t control other people’s mistakes, there are definitely a few things that you can do to help get your funds faster.
7 Things You Can Do To Ensure Fast, Seamless Deposits From Your Payment Processor
1. Avoid Keyed Transactions
For brick-and-mortar shops, whether a card is keyed in or swiped/dipped can make a big difference in your processing times. When you complete a transaction with a magstripe swipe or EMV chip, it’s treated as Card Present. Keyed transactions are treated as Card Not Present (CNP) because the equipment is not able to tell whether the card is physically present. (eCommerce transactions are treated as CNP as well.) If your retail shop has an unusually high number of keyed transactions, your processor may become suspicious and implement a hold or a reserve fund. Keyed transactions may also take an extra few days to process.
Of course, occasionally keying a card in when it won’t swipe or the chip reader isn’t working is fine. But if you do this on a consistent basis, it’s going to become a red flag. And it’ll cost you more, too, because CNP transactions come with higher rates.
2. Stay Within Your Processing Limits
Mobile processors such as PayPal and Intuit GoPayment have been known to set weekly and monthly limits for merchants based on their processing histories. Exceeding those limits can sometimes trigger holds or even account terminations, which definitely is not how you get merchant funds fast.
Even if you do have a traditional merchant account, you should be careful about unusually busy weeks or months. Drastically exceeding your normal processing amount is usually a red flag. Combined with a large number of keyed or high-value transactions, you could very well find your funds tied up in a hold or a reserve account.
That’s not to say gradual increases over time will look suspicious. It’s more the one-off spikes that tend to raise alarms. You can sometimes work around these concerns by contacting your service provider and letting them know that you expect a higher than average volume because of a sale, special event, or new product launch.
3. Get Documentation For High-Value Transactions
Just like unusually higher overall volumes can draw the attention of your merchant account provider, so can unusually large individual transactions. With third-party processors in particular, they’ll usually ask for an invoice, signature, and other documentation and hold the funds until you provide the documentation or the chargeback window has closed. Some merchant accounts may also specify that for transactions above a certain value, a percentage will be subject to a hold for so many days.
However, it’s generally a good idea for any large transaction (over $500) to have a numbered invoice and signature.
4. Minimize Your Chargebacks
This one applies especially to eCommerce sellers because the vast majority of chargebacks are for CNP transactions: Try to keep your chargebacks to a minimum. A high number of them signifies to your processor that customers are unhappy with your service or you have been accepting a high number of fraudulent cards. Neither situation is acceptable.
You can reduce chargebacks by having a clear and well-stated review policy on your website, on the product listing page, and in the receipt. Make sure your processor’s fraud prevention features are enabled, such as AVS and CVV. Be wary of shipping items to an address that doesn’t match the billing address, especially for large orders.
5. Optimize Batch Times
Unless you’re with a third-party processor such as Square or PayPal, you can expect to pay a batch processing fee every time you submit a transaction for processing. Obviously, it’s more cost-effective to submit a large number of transactions at once. However, it’s an industry-standard security process to batch out at least once in a 24-hour period. Waiting longer than that often comes with higher processing rates because of an added security risk. And, obviously, it also takes longer to get your money because you’ve waited longer to finalize the transaction.
Generally speaking, you can control when you choose to batch each day, whether it’s at 5 p.m. or 10 p.m. However, your processor may have a cut-off time for batching for you to receive next-day or two-day funding. For example, the processor may prefer to receive funds by 6 p.m. to provide next-day funding. If you batch out at 8 p.m, the transactions won’t be processed until the next day at 6 p.m., and so it would take an extra day to receive your money.
The best solution is to talk to your processor and make sure you are clear on any deadlines.
6. Choose A Processor With Fast Funding Times
Not all processors are the same, and that includes their processing times. Two business days has become the industry standard, but some processors can still take longer than that (3-5 days). There may also be some exceptions to the standard funding time for particular types of transactions (keyed, for example).
If you are an established business with a good processing history, you might also find yourself eligible for 24-hour/next-day funding. Not all merchant service providers have this, and not all offer it to every merchant. But it never hurts to ask.
A final word of caution: Be sure that you’re clear on what “next-day funding” actual means, as it appears there’s some inconsistency in how the term is used. Where possible, talk more in terms of hours and business days.
7. Watch Your Cash Flow & Bank Balances
Lastly, keeping a steady cash flow will help you get funded faster. This is somewhat of a catch-22, of course, because your payment card sales help you keep your steady cash flow, and keeping a steady cash flow helps you receive your payment card sales faster. The reason having a steady cash flow is important has to do with risk, again.
When a transaction is held, some processors want to see your bank statements to make sure you do have the money to cover any chargebacks that might occur. After all, if the processor releases funds and you spend them to cover your other business expenses, when a chargeback occurs, you won’t have the money to pay the processor back.
Having a good cash flow is for many other reasons vital to a healthy business. Being able to get your payment card sales faster from your processor is just one additional reason to keep that cash flowing smoothly.
The 8 Best Payment Processors With Fast Funding Times
Below, in no particular order, are eight processors who we rate highly and who also promise fast funding on their website. By listing these names, we hope to help you shorten your search time for a processor that fits your needs.
Square used to offer next-business day funding by default — meaning merchants would get their funds in 24-48 hours (except for weekends and holidays). However, Square has since rolled out a new feature, the Square Card. Instead of being routed to a bank, Square funds are deposited into a digital wallet linked to a debit card and can be spent right away. However, if you still prefer to route funds to your bank, that’s an option. And if you need quick access, Square does offer instant and scheduled deposits for 1% of the transfer value (on top of your Square rates).
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2. Dharma Merchant Services
Dharma Merchant Services
Dharma offers 2-day business funding by default, and retail merchants who process card-present transactions may be eligible for next-day funding. Take note of whether Dharma signs you up through TSYS or Fiserv (formerly First Data), because it will affect your cut-off time for batching.
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3. Payment Depot
Payment Depot offers 24- to 48-hour funding for its merchants, though it doesn’t make it clear what factors determine how quickly you get your funds. Unlike Dharma, there is no next-day-funding plan for qualified merchants.
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Helcim offers 2-business-day payouts for most US merchants, with next-business-day transfers for weekend transactions. You can also opt for next-business-day deposits as standard for an additional $10/month, which is different than many other processors.
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Fattmerchant promises next-day funding for merchants on its website, but it doesn’t make it clear that next-day funding is only for qualified merchants. By default, FattMerchant offers 24-hour funding for everyone — in other words, 24 hours after you batch out, you’ll have your funds. With their next-day funding plan, you’ll get your funds the morning after you batch out. Fattmerchant has also recently started to offer same day funding, for an additional fee. With same day funding, payment card sales are batched at five different times in a 24 hour period, and funds are deposited into your account a few hours thereafter.
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PayPal was really the first third-party processor to offer instant access to your money from credit card payments. By default, funds are available in your PayPal account almost as soon as the transaction is complete. You can spend the money online anywhere that PayPal is accepted, and if you have the PayPal debit card you can spend your money anywhere that accepts Mastercard. Transfers to a bank account can take up to 5 days, but it will depend entirely on your bank. You can also initiate an instant deposit for 1% of the transfer amount.
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7. Host Merchant Services
Host Merchant Services
Like many of the others already mentioned above, Host Merchant Services offers next day funding because it takes advantage of the batching times of the ACH system. Some approved accounts (presumably, businesses with excellent credit and stable processing) can even qualify for same-day funding.
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8. National Processing
National Processing doesn’t place much emphasis on their website on funding times, but, according to their pricing page, next day funding is available. Not a lot of other information is available, but we wouldn’t be surprised that, to take advantage of this program, your business must have excellent credit history, and you must batch your sales before some daily deadline. You’ll probably have to pay an additional fee as well.
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Is There A Secret To Getting Your Funds From Your Processor Quickly?
There are no tips or tricks or magic buttons to push to get your money fast when you have a merchant account. If you want to get your funds as soon as possible, you need to be a responsible merchant, establish a good processing history, minimize your risky transactions, and batch out every day by the cut-off time. You might have to pay an additional fee as well, if you truly need “instant funding.”
Of course, all of that is useless if your processor’s default processing time is 3-5 days and cannot offer anything faster. So, if fast funding is important to you, make sure you check on deposit times before you sign a contract. Look for a reputable processor that has funding options that work for your needs.
Last, if the worst should happen and you have a large transaction held in limbo, you have options. Contact your processor and see what you can do to work it out. If you’re really in need of cash, you can get a small business loan (a working capital or bridge loan, specifically). This can help keep the lights on, ensure your employees are paid on time, pay your suppliers, etc. until your cash flow can smooth out again.
And if you have questions, we are always here to help. Just leave us a comment below!
A Last Look At Our Top Picks
Summary - Instead of being routed to a bank, Square funds are deposited into a digital wallet linked to a debit card and can be spent right away. However, if you still prefer to route funds to your bank, that's an option.
- Dharma Merchant Services
Summary - Dharma offers 2-day business funding by default, and retail merchants who process card-present transactions may be eligible for next-day funding.
- Payment Depot
Summary - Payment Depot offers 24- to 48-hour funding.
Summary - Helcim offers 2-business-day payouts for most US merchants, with next-business-day transfers for weekend transactions.
Summary - By default, FattMerchant offers 24-hour funding for everyone — in other words, 24 hours after you batch out, you’ll have your funds.
Summary - Be default, the funds available in your PayPal account almost as soon as the transaction is complete.
- Host Merchant Services
Summary - Host Merchant Services offers next day funding because it takes advantage of the batching times of the ACH system.
- National Processing
Summary - Next-day funding is available, although the National Processing website does not get into specifics about who qualifies.