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Don’t Blow Up Your Merchant Account: Determining Your Volume Cap

As an entrepreneur, you are in business to make money. The title of this article includes the phrase: “determining your volume cap”; the more transactions you process, the more money, right? Why on in the world would a bank want to cap the number and size of the credit card transactions that your merchant account can handle? At E-Commerce 4 IM, we have been helping businesses like yours get and maintain merchant accounts for years. Based on our experience, there are some excellent reasons why you not only want to think carefully about the volume caps on your merchant account but stay within those limits as well.

Why Do Processors have Volume Caps?

To understand merchant account volume caps, it helps to look at those accounts from the banks’ perspective. What many retailers, especially those in the e-commerce world, fail to appreciate is this: a merchant account really is, to some degree, a line of credit.  Here is why: when a credit card charge is run, the bank is guaranteeing that the merchant will get paid and the customer will receive a product or service. But, fraudulent or otherwise invalid transactions can be reversed in as many as 180 days after the date of the purchase. The bank can recover those funds from the retailer—unless, of course, the retailer is out of business, has skipped town, or is insolvent.

The bottom line is this: the banks are underwriting every transaction. If they see ticket amounts or high charge volumes that are out of character for your business, they can (and often will) place a hold on your account. If your bank suspects fraud has occurred, or if your business has experienced a large volume of chargebacks, they may choose to terminate your account altogether. In the meantime, you are left with an e-commerce business that is dead in the water. That is precisely the circumstance that E-Commerce 4 IM helps clients avoid.

Avoid Held Funds with Expert Advice

Avoiding the sudden death of your business due to you being unable to process credit card charges is of paramount importance. Therefore, it is imperative to set realistic expectations for the bank when you make your initial application for a merchant account. Your merchant account application is the document that the banks will use to determine the risk that your business would pose to them. Specifically, they will ask you what you anticipate your “highest ticket” (the largest amount that you expect to charge in a single transaction) will be and the number dollar amount (volume) you expect to process. If you’re just getting your business off the ground, these can be tough numbers to come up with. If you are a “high risk” business, you can leverage the experience of E-Commerce 4 IM to help you figure this out. With our years of experience and our relationships with numerous banks both in the U.S. and abroad, chances are we’ve seen your business before. We can help provide a realistic assessment that will help ensure that your merchant account application is approved.

Let Us Give You the Advice You Need

When you are deciding what numbers to list for the highest ticket and your annual credit card charge volume, it won’t help to be too conservative. If you go beyond your volume limits, some very unpleasant things can happen to your business. On the day that you exceed your volume limit, your account may be suspended or the entire batch of charges could be held for manual review. In extreme cases, the bank may even hold the batch for an extended period, possible up to six months. If your business is processing transactions that appear especially risky, the bank may terminate your account.  Therefore, whatever volume you are expecting, be sure to make your cap higher than what you expect. But, don’t make it too high. The higher your anticipated transaction volume, the more risk the banks will see in your business. It seems like a fine line, and it is. That is why the expertise of E-Commerce 4 IM is so valuable. We’ll help you navigate the negotiating process, saving you time and frustration.

If you have had trouble finding a bank to work with your business, or if you are a high-risk business frustrated by credit card processing woes, let E-Commerce 4 IM help. We’ll use our vast resources and experience to help you realize the full profit potential of your enterprise. Contact us here or give us a call at 1-800-570-1347.

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