When running a business, there are a lot of different things to focus on. The last thing you want to deal with is getting a hold of your processor to see why you are not getting your funds, especially during the holiday season or during an unpredictable year like 2020. This piece will go through why you are not receiving your funds, how you can get them, and how you can raise the limits on the account so you can avoid this headache.
Why is my credit card processor holding my funds?
Let’s start with understanding the credit card processor’s perspective. To the credit card processor, these limits are mechanisms to prevent fraud and liability. When your business applies for a line of credit, they will view you as a potential source of risk, which they will then evaluate your risk level based on your business and credit. This concept is quite similar to applying for a credit card.
When your customer makes a payment, it will pass through the processor flowing into your account. This arrangement makes the processor exposed to risk. If there are any invalid or shady transactions, the processor will take the initial loss. Surely there will be a penalty for the business, known as a chargeback, but if the business closes down for any reason, the processor will bear all liabilities. So the credit card processing limit is about limiting risks based on your business’ credit score, processing history, and product sold so they can limit their risk exposure in case anything goes wrong.
Some of the most common reasons for a funding hold:
- A sharp and unexpected increase in volume
- Increase in chargebacks
- A single transaction that is abnormally large (typically above $10,000)
Remember, what looks like a great business to you may look like a possible fraudulent case to them. Since they’re a primary risk bearer, they can’t take chances and will intervene once your sales volume reaches a certain amount. And you certainly don’t want that to happen.
How long can a credit card processor hold funds?
The short answer is, as long as they want. Each processor has a different procedure to get through risk review and release the funds. The average for this, across the board, is three weeks. You will be asked to provide financials and verification of the recent sales. From there, the bank will review everything and release your funds, and then adjust the limits on your account to get ahead of this going forward.
What factors do processors look at to evaluate risk?
When setting up a merchant account, there are two ways to get underwritten. Companies like Square, Stripe, and PayPal will automatically board your account and then underwrite your transactions. The other option is applying for an account, and going through underwriting before you start processing. This route has more to go through to get set up, but allows for less friction once up and running. A few of the things the processor will look at when evaluating risk are:
- Your average transaction size
- Average monthly volume
- The average delivery timelines
- Payments in advance
- Chargeback/refund ratio
- Fulfillment process
How do I raise my credit card processing limits?
You can raise your credit card processing limits and allow some room in your sales forecast. When you do your sales forecast, remember to mark it up a little and use that as the basis of your credit card process limit. 2020 is an outlying year due to widespread COVID19 disruptions. While shipment delays were frequent due to transport disruptions and people generally have a lack of willingness to spend, eCommerce businesses have experienced a demand surge as more people are staying at home. That’s why it’s essential to slightly over-forecast your volume, so you can have enough leeway for credit card transactions and raise your processing limit.
After you’ve readjusted your sales forecast, it’s time to raise your processing limit. Make sure you have already reviewed your everyday business banking balance, credit score, and track record. Also, keep in mind that if you have set up recurring billings with your customer, you would need to make sure there are minimal rejections. When in doubt, just remember one thing: it is about reviewing risks. If you have a good credit score, with few outstanding payments, and if your business is growing steadily in turnover and revenue, you can prove to the processor that your risk level is low and there is no need to worry.
It may take some time to get your request through, and there can be follow-up steps and verifications. Remember, patience is key, as thorough due diligence needs time. Also, always seek professional help if you need any support.
At Payline, we are here to help you grow and solve your problems as your business’ payment partner. Our platform is compatible with your systems, and our service teams are always on standby for you.
If you have a Payline account and need to raise your limits for any reason, reach out to your account manager and they can help you through the process.
Get your business credit ready for the holiday seasons
The last thing you want during a successful holiday sale campaign is being held up by your credit card processor. Raise your credit card processing limit and let your business flourish. With Christmas approaching and 2021 within reach, it’s time to forecast your sales and get your inventory ready. But if you overlook one aspect on the payment and transaction side, your credit card processor may hold up your sales or even freeze your account. Don’t want that to happen? Here is how you can avoid potential trouble by raising your credit card processing limits.
Preparing for your peak seasons
Typically, there are two occasions when business owners need to forecast sales and turnovers: holidays and year-end. Hot periods like Christmas, Black Friday, and Thanksgiving are when businesses usually experience a sudden spike in sales. At the same time, businesses also collect sales data at the end of the year, so they can predict how their revenue and customer base will grow in the future. You will usually stock up and get ready to meet their demands as a business owner. Your business is your revenue source and baby after all. But there’s one more thing that you may overlook: is your credit card process limit compatible?
Credit card processing limits matter
Your credit card processing limit dictates how much transaction volume your business can handle, so it is best to pay close attention to it. It is the limit of how many credit card transactions you can process for a given time before you hit a threshold. Factors determining your limit include the type of business, transaction size, monthly turnover volume, and your business’ credit score. The limit can either be on an individual translation or your overall sales. If your transaction amount exceeds the credit card processing limit, your processing platform may charge you extra or even freeze your account. That would be the last thing you need during a hot sales season or a steady growth, and will surely turn your customers away.
When your customer makes a payment, it will pass through the processor being flowing into your account. This arrangement makes the processor exposed to risk. If there are any invalid or shady transactions, the processor will take the initial loss. Surely there will be a penalty for the business, known as a chargeback, but if the business closes down for any reason, the processor will bear all liabilities. So the credit card processing limit is about limiting risks based on your business’ credit score, so they can limit their risk exposure in case anything goes wrong.
Remember, what looks like a great business to you may look like a possible fraudulent case to them. Since they’re a primary risk bearer, they can’t take chances and will intervene once your sales volume reaches a certain amount. And you certainly don’t want that to happen. Check out what Business Insider has to say about the topic as well.