What Causes The Revocation of a Merchant Account

When it comes to getting paid for products and services, accepting credit cards can prove quite beneficial for your business.  Credit card payments are accepted everywhere in today’s increasingly mobile society.  You can pay your bills online, shop at grocery stores and pay for a night out at the movies.  In fact, you can now use a card to make donations to charitable and non-profit organizations or to pay for food and merchandise at various venues. It appears obvious that a business not accepting plastic may suffer from a loss of sales.  Unfortunately that is exactly what happens when your credit card processing privileges are revoked.  This can occur for any number of reasons, however the end result is the same. When you lose your merchant account, you lose the ability to process credit cards and gain the maximum profit possible.

What would cause your merchant account to be revoked?

Many consumers and merchants are under the false impression that all businesses can accept credit cards.  That is not necessarily the case.  While it is possible to accept credit cards without a merchant account (many mobile processors are now merchant account free), most small businesses will need a merchant account.  If you operate online or other high-risk credit card processing a merchant account becomes even more important.  Getting a merchant account may not prove to be the most challenging feat, however keeping one requires some maintenance.  There are several ways a merchant can easily lose their merchant account.

  • Violate merchant agreement-  There are certain rules and restrictions as to how you can handle each credit card brand.  Merchants must agree to these stipulations in order to accept that credit card brand at their place of business.  Failure to do so or violation of the merchant agreement could result in the loss of your merchant account.
  • Excessive chargebacks-  A chargeback occurs when a customer disputes a charge.  They may do this because they received the wrong product, an inferior product or after they have contacted you as the vendor directly with a dispute. The merchant is given a chance to disprove the dispute, however if you are unable to do this, your account will be charged and the customer will receive a credit on their account.  Too many chargebacks could jeopardize your account, therefore it is very important to reduce any instances where a customer might take their dispute to the credit card company.  Fraud can lead to disputes as well, therefore you should be aware of how to spot fraudulent use of a credit card.
  • Exceeding limits-  When you opened your merchant account you anticipated how many transactions you would process resulting in “volume” limits and “ticket” limits.  Volume limits are underwritten by your credit card processor and are generally based on your credit score.  The same thing is true for ticket limits.  If you do not process transactions within these limits your account could be frozen or terminated.
  • Security issues-  Failure to abide by security measures set forth by the PCI and individual merchant agreements can prove fatal to your business.  Not only do you put your customer at risk but also the ability to accept credit cards in the future.
  • Insufficient funds-  Merchants agree to pay certain fees that are withdrawn from their account.  Should the occasion arise where there is not enough money in the account to cover daily processing fees or monthly fees and charges, this could trigger the account to be closed.

It is very important to manage your merchant account carefully.  Make all efforts to ensure you are operating within your merchant agreement and following all security measures.  It is possible for a business to lose their merchant account indefinitely.  This occurs when your business lands on the Match File or Terminated Merchant File.  More or less a blacklist of merchants who have lost their merchant account, landing on this list will almost guarantee any future merchant account applications are denied.

Posted on Thursday, January 20th, 2011