You’re likely to have heard of the terms “account freeze” and “processing lock” if you are responsible for processing payments for your company. What do these terms mean?
Account hold refers to when a payment processor places a temporary hold on an account of a merchant. This can occur for many reasons, including suspicions of fraud or suspicious activity.
A processing freeze acts like an account hold but lasts longer. It may be imposed not by the processor, but by the card issuer (e.g., Visa or Mastercard). If the merchant is suspected to be violating the card issuer’s rules, a processing freeze may also be applied.
Merchants may find it frustrating to have their accounts frozen or held. They might not be able to process payments. Sometimes, account closures can be caused by freezes and holds.
Merchants need to be aware of what account holds and processing freezes mean. Also, what you can do about them.
What’s an Account Hold?
An account hold, as we have already mentioned, is when a payment processor puts a temporary hold onto a merchant’s bank account. There are many reasons this might happen, but most commonly it is due to suspected fraud or suspicious activity.
A processor will place a freeze on an account if they suspect that the merchant is involved in fraud. This prevents any additional charges from being made. The processor will investigate the matter to determine whether the suspicion is based.
The merchant can continue to process payments if the processor determines that the merchant is not engaging in fraudulent activity. If the processor discovers that the merchant is involved in fraud, however, the account could be closed immediately.
What’s a Processing Freeze?
A processing freeze acts like an account hold but lasts longer. It may be imposed not by the processor, but by the card issuer (e.g. Visa or Mastercard). If the merchant is suspected to be violating the card issuer’s rules, a processing freeze may also be applied.
A card issuer will place a freeze on an account if they suspect that a merchant is engaging in fraud. This prevents any additional charges from being processed. The issuer will investigate the matter to determine whether the suspicion is valid.
The merchant can continue to process payments if the issuer determines that there was no fraudulent activity. The account could be closed if the issuer discovers that the merchant is involved in fraud.
What Causes Account Holds and Processing Freezes?
There’s a good chance that you have experienced an account freeze if you are a merchant. It can be frustrating, and it is important to know what caused it. These are the top reasons accounts hold:
- Chargebacks
Chargebacks are one of the main reasons accounts are held. Chargebacks are when customers dispute a charge made to their credit card issuer. Your merchant account provider might place your account on hold if you have too many chargebacks.
- Fraudulent Activity
Fraudulent activity is another reason accounts can be held. To prevent any further damage, your merchant account provider may place a hold on your account if they suspect that it is being used for fraudulent activity.
- Excessive refunds
Your merchant account provider might place a hold on your account if you can issue any refunds. Fraudulent activity can issue refunds. You should have a reason to issue a lot of refunds. You could be subject to an account hold.
- Credit Card Processing Errors
Sometimes account holds are caused by credit card processing mistakes. To prevent any further problems, your merchant account provider might place a hold on your account if you are processing many transactions.
- High-Risk Business
Your merchant account provider might place a hold on an account if you are a high-risk company. High-risk businesses are more susceptible to fraud and chargebacks. You should take extra precautions to avoid fraud and chargebacks if you own a high-risk company.
- Poor Credit History
Your merchant account provider might place a hold on your account if you have poor credit. Merchants with poor credit histories are more likely than others to have financial difficulties, which could result in chargebacks or fraud. You should take extra precautions if you have poor credit to avoid chargebacks or fraud.
- Suspicious Activity
Your merchant account provider may place a hold on your account if they suspect you are engaging in suspicious activity. This is done to stop you from causing any damage to your credit card processing system or your account.
It’s crucial to understand the reasons for account holds if you are a merchant. You can avoid these account holds by understanding their causes. To resolve an account hold, contact your merchant account provider immediately.
What can you do to avoid account holds and processing freezes?
You can take steps to prevent your account from being placed on hold or frozen.
Ensure that you follow all rules and regulations established by your card issuer and/or payment processor. Ask your payment processor if you have any questions.
Pay your bills on time to maintain a healthy credit rating.
– Be ready to cooperate with your card issuer or payment processor if they contact you about suspicious activity.
Contact customer service if you feel your account was unfairly put on hold or frozen.
Although processing freezes and account holds can be annoying, they are usually necessary for good reasons. You can reduce the chance of your account being placed on hold or frozen by following these tips.
You may be seeing unusual amounts of freezes and holds on your merchant account. This is especially true if customer service is not providing results. Balanced Processing Partners is the right place to look if you’re looking for a merchant account that suits your needs and your budget.
To learn more please give us a call at (800) 354-6256 or contact us via email at [email protected].