5 Best Practices to Avoid Merchant Account Freezes

Get Recommendations for the Best Merchant Account

    Merchant account freezes are actually more common than you think, and they happen to all kinds of SMBs. Apple Pay vendors or even those Apple Pay similar apps may experience merchant account freezes and see their funds withheld for a certain period of time. While this can derail your business operations, there are many things you can do to avoid this.

    To understand how to prevent frozen merchant accounts, allow us to explain common causes and more.


    Understanding Merchant Account Freezes 

    When your merchant account is frozen, you will not be able to accept new transactions. Whatever prior income you have made will be kept and only deposited when your account is no longer frozen. Merchant account freezes are commonly understood as the worst-case scenario for merchants because they prevent you from conducting business altogether. 

    When your funds are held, they may be put into a reserve fund. It may be used as a guarantee for chargebacks and fraud or used as a security deposit.

    What Are The Causes Of These Freezes?

    These are some of the most common causes of frozen merchant accounts:

    • A breach in contract or your merchant processing agreement (MPA) which states your monthly volume, ticket size, fees, and more, can cause a frozen account.
    • Suspected fraud may be another cause of a frozen account, which processors do to protect you. This may happen if you have an unexpected surge in sales.
    • Excessive chargebacks may also lead processors to freeze or investigate your account. 

    How To Deal With A Frozen Merchant Account?

    When dealing with a frozen merchant account, you usually have to see the process play out before planning your next steps. It helps to pinpoint why exactly your account has been frozen, and then you can strategize on how to recover your account. If you cannot proceed with business as usual, you can consider another payment processor in the meantime.

    5 Tips To Avoid Merchant Account Freezes

    Prevention is the best thing you can do to avoid merchant account freezes. Here are some of the most effective things you can do to prevent a frozen account from happening:

    1. Pick A Suitable Processor

    Knowing your options helps in ensuring that you avoid a merchant account freeze. You usually have a choice between a direct or third-party agreement. The former may be a requirement for merchants that belong to high risk industries. Depending on the nature and type of business you own, you may require a particular type of processing power.

    2. Be Consistent With Your Expectations

    Choosing a merchant account also requires a thorough understanding of your business. Applications request your business’ average processing volume and transaction sizes to monitor any activity that may be out of the ordinary. Inform your processor if things change from month to month so that you do not get flagged. 

    3. Deliver What You Promised

    Be sure to sell what you told your processor you would sell. Fabricating your application may have negative effects in the long term. Stick to what you promised, as processors know when you have unusual transactions that do not match or add up to what you would normally be doing.

    4. Never Mix Up Accounts

    Do not use a single merchant account for various purposes or make the mistake of mixing up your different accounts. You may be subject to a review if your processor spots any suspicious activity with regard to several different types of transactions that stray away from your normal business proceedings.

    5. Reduce Chargebacks And Fraud

    Chargebacks, albeit common, may result in your account getting terminated, held, or frozen. Reducing chargebacks is possible when you deliver on your promises to your customers and sell them high-quality products or services.

    Frequently Asked Questions

    Still want to understand more about frozen merchant accounts? Here are some FAQs!

    How long can merchants hold funds?

    Your case can depend on several factors, and merchants can hold funds for any particular period of time. Holds can last a few minutes, weeks, or up to 180 days, depending on the situation. 

    What are high risk merchant accounts?

    High risk merchant accounts are accounts that have been deemed “higher risk” for things like chargebacks or fraud

    Can a business have more than one merchant account?

    Businesses can have multiple merchant accounts, and this can be beneficial in the sense that you can distribute your sales volumes and chargebacks across your accounts. 

    Frozen Merchant Account In A Nutshell

    A frozen merchant account happens when your processor stops all your new credit and debit card transactions and withholds funds from recent transactions due to a breach in contract, excessive chargebacks, or suspected fraud. 

    Opening lines of communication with your processor can help you recover your frozen account. Be sure to follow some of our suggested tips as well to avoid account freezes in the future. 

    For more information on payment processors for your business, be sure to check out some of our blogs here on Processing Card!