Merchant account Holds and Freezes

Almost half of the merchants affected have no idea why their account freezes or holds. They don’t realize how important it is to know why the sudden holds and freezes occur. Although both of them are for their protection, sometimes the holds and freezes can be a pain for the merchant. But these can be avoided very easily if you know a few basic things. Anyway, today I’m going to explain them and if you are a merchant, you should know the difference between a freeze and a hold of an account.

Freezes & Holds

If you didn’t get it already, holds and freezes are not the same. That’s why I’ve been using both of the terms till now in all my sentences.

Hold:A hold is when the merchant service providers withhold some of their processing amounts and put them into are serve fund. You can think of it like a security deposit. When the hold is placed on the merchant account, a small total is withheld as a fixed guarantee against frauds and chargebacks. But the amount will still belong to you unless any refund or chargeback is scheduled to process.

These holds on merchant accounts area kind of protective measure for chargebacks, refunds, and frauds. This hold could be applied to a merchant account as a total percentage of the whole amount in your account or a percentage from each transaction.

But this hold is not applicable to all the merchant accounts. Generally, a business with high risk and somewhat suspicious processing history will be most likely to require the hold. But if you own a small business with low risk and have a clean processing record, you may not need a hold.

Freeze:If you want to hear it in a simple sentence, a freeze is just a fraud protection measure taken for a merchant when any suspicious activity is reported. This freeze is far worse than a hold. When your merchant account is frozen, you will lose your credit card accessibility until the matter is resolved.

After a freeze on the merchant account, the payment processor is obliged to have a look at the suspicious activity or the processing anomaly. The processor then makes sure everything is secured and protected before the reactivation of that merchant account.

The reason why your account was frozen is easy to detect and in most cases, the freeze can be withdrawn by contacting the payment processor.

If you think about it, a freeze is much worse than a hold. With a hold, only a fraction of your amount is kept as a guarantee against refunds and charge backs, while the rest of the amount is still accessible to you. You can spend that amount in any way you like. But when your merchant account is frozen, you are deprived of all rights to use your existing amount in any way. This is can be an issue, especially if you own a big company to run and need a pile of money to keep your business going. But both hold and freeze can easily be avoided if you are conscious of the activities occurring on your account.

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