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Why Merchant Funds Might be Placed on Hold

Updated: Dec 29, 2023

As a business owner, you know how nerve-wracking it can be if your bank deposits take longer than expected to hit your account. And, depending on the reason, it can take some time to have the money released (anywhere from days to months!). Understand why your merchant funds might be placed on hold to help better navigate what to do next.

Account Hold vs. Account Freeze

It’s important to note that an account can be on hold, or it can be frozen… and while these are similar, they are not the same. A hold means the processor literally holds the processed funds instead of depositing the money into the merchant’s account, whereas a freeze is when a business is no longer able to accept new credit and debit card payments (plus the withholding of recent transactions as well). A freeze is one of the worst-case scenarios and should try to be avoided!

Reasons for a Hold

Payment processors reserve the right (via the contract) to pause batch settlements and investigate merchant activity. There can be many reasons for them to place a hold, but these are a few of the most common:

· Suspected fraud: as one of the first lines of defense for both the merchant and the cardholder, if there is suspected fraud then a processor will usually hold an account until it’s further analyzed.

Sometimes a potential fraud hold can be triggered by legitimate transactions, especially if there are big swings in processing volume during a short period (like a spontaneous seasonal spike). Other times it can be because an account was opened with the purpose of deceiving customers- at which point the payments provider will investigate to protect the cardholders’ interests.

· Breaking contract terms: there are rules, fees, and restrictions decided upon when a merchant processing agreement is signed- and if those are broken or violated in any capacity, the processor has the right to hold, freeze, or even terminate the business’s account.

· Excessive chargebacks: win or lose, chargebacks and chargeback ratios are extremely important for merchants- too many will always lead to a hold (if not a termination) of the account. Working with a qualified payments processor, like Align eCommerce, is the best way to avoid excessive chargeback risks that will end your company’s processing ability.

If your merchant account is ever placed on hold, reach out to your payments provider immediately to find out why. For more answers and advice, or to work with an expert merchant service provider, reach out to Align eCommerce- we’re here to help!

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