Pushing your merchant account's limit

By Steve Thompson

Merchant account providers do not always have the same goals and priorities as their customers. As a business owner, you are trying to increase sales and customer interest, but going too far, too fast, could result in problems with your merchant account.

In most merchant account contracts, there are limits on how many transactions it will process for you in a given month and on how much money you can accept from credit cards. If you go over these limits, the merchant account provider can freeze your account, refusing to accept any more transactions, or it might charge exorbitant overage fees.

Setting limits
When you first sign up for a merchant account, read your contract carefully. Find out what limits are placed on credit card transactions and what happens if you exceed those limits. You should discuss those details with a representative of the company.

This is especially important to know during peak sales times for your business. For example, many retail outlets experience sharp upsurges in sales around Christmas, while a pool supply or construction business would see increases as summer approaches. Know the ebb and flow of your business and how that might impact your merchant account.

Consequences of exceeding your limits
The majority of merchant account providers will simply freeze an account when the business exceeds its quota. This means that, until next month, you will not be able to process any credit card transactions, which can severely hobble your business if your customers don't carry cash.

If the merchant account isn't frozen, you will probably see an uptick in fees on your next bill. This can be equally as devastating, and you might not have any warning unless you've read your contract closely. If you think you might be nearing your limit, pull out the paperwork and make sure you know the consequences.

You might also experience these consequences if your sales suddenly increase by a large amount. For example, if your daily sales go from $2,000 to $10,000, your merchant account might freeze your access. This is because the account provider finds the change in activity suspicious, and it doesn't want to be liable for any fraud on your part.

Avoiding freezes and fees
Business owners must be proactive if they want to avoid funds freezes and overage fees. Call your merchant account provider and ask for a temporary increase to get you through the upswing. Just make sure you do this before you exceed your monthly quota.

If you think that the increase in sales is permanent, you might need to re-negotiate your contract or look for another merchant account provider. Obviously, you won't be turning away customers simply because your merchant account no longer fits your needs, but you need to make the change sooner rather than later.

If you suddenly experience an increase in sales that you think might flag your account in the merchant account system, you also need to be proactive. Be prepared to explain the change to your merchant account provider so they don't suspect your business of fraud.

Article by Steve Thompson

Published: June 8, 2010