High-risk merchant account suspension
If you’re a business owner, you understand how important it is to have a good credit card processing account & avoid high-risk merchant account suspension. You need it to accept payments from your customers and make sure they’re satisfied with the products or services they purchased from you. If your processor shuts down your merchant account because of high-risk activity, though—or worse yet, if it declares bankruptcy—your business could be in danger.
Nearly all credit card networks have a set of rules that merchants must follow to accept and process cards.
The rules are in place to protect your business, the cardholders, and even the credit card companies themselves.
If you’re not familiar with the term “chargeback,” it refers to when a customer disputes a charge on their bank statement because they didn’t receive or approve a transaction or something went wrong with their purchase (such as receiving an item that was damaged).
In these situations, both Visa and Mastercard require that you refund your customer’s money at no cost to them within 30 days of receiving notification from their bank. If this doesn’t happen, they can file an official complaint with us through our dispute resolution procedure.
To prevent these types of issues from happening in the first place—or at least limit them—financial institutions have put together guidelines called “acceptable risk” levels based on merchant categories (retail stores vs banks) as well as other factors such as industry type (gas stations vs restaurants), location type (major cities vs suburbs), volume level per month/year, etc., which we also consider when reviewing applications for approval requests by businesses wishing to accept international cards.
Most of these rules are in place for one reason: TO PREVENT FRAUD.
As a business owner, you understand the importance of maintaining a high-risk merchant account. Your company depends on it to bring in revenue and keep your employees working. While some businesses assume they’ll never have any problems with their accounts, many others know that at some point they may run into trouble with their payment processing company.
The good news is there are steps you can take to prevent having your account suspended or revoked by your credit card processor. Some of these rules are in place for one reason: to prevent fraud.
Fraud is a big problem in the world today; companies lose billions of dollars every year from credit card fraud alone! That’s why banks, credit card companies, and even consumers need protection from it—and this protection starts with making sure merchants keep their businesses above board and follow all applicable laws related to payment processing services.
Declared high-risk for other reasons?
However, if you’ve been declared high-risk for other reasons, it’s essential to know what you’re up against.
The most common reasons for high-risk merchant account suspension and termination are:
● Credit card chargebacks filed by the issuing bank on behalf of their customers.
● Non-compliance with card network rules or regulations.
● Not filing a required form on time (such as an annual data validation notice).
Causes of high-risk merchant account suspension and termination?
The following are some of the more common issues that cause merchant account suspension and termination:
Fraudulent activities, such as refund abuse
A high-risk merchant account has been suspended for fraudulent activities. Fraudulent activities are the most common reason for high-risk merchant account suspension. This can include refund abuse, chargebacks, excessive chargebacks, or unbalanced returns processing.
Because fraudulent activity is such a large red flag for banks, it’s important to understand why these actions are considered high risk in the first place and how they can be avoided to protect your ability to accept credit card payments online.
High chargeback rates (exceeding 2% of volume)
Chargebacks are a common form of dispute, and they can be caused by fraud or by an honest mistake on the customer’s part. If you’re seeing a high chargeback rate (exceeding 2% of volume), it’s often a sign that your company is facing fraudulent activity.
However, not all chargebacks are fraudulent: sometimes customers will dispute an order because they think they were charged too much or because they simply want to get their money back. In these cases, the customer was not defrauded but feels as though their purchase was unsatisfactory—regardless of whether or not this is true!
A large number of returns and chargebacks can also indicate anti-fraud risk, which may result in the cancellation or closure of your high-risk merchant account if these problems continue to occur over time.
Illegal activities
It’s good to know that a high-risk merchant account can be suspended if you engage in certain illegal activities. This is because a merchant account is a bank account that businesses use to accept credit card payments. The banks don’t want to risk their reputations by doing business with companies that could potentially defraud customers or break laws, so they have systems in place to protect themselves from fraudulent transactions.
Failure to comply with the processor’s terms of service
● Read the terms of service.
● Make sure you understand the rules.
● Follow the rules and make sure they’re followed by your employees and anyone else who handles your payments.
If you don’t understand a rule, ask questions—but be prepared to have them answered by people who are knowledgeable about that particular area, not just by someone who “knows it all. If something seems vague or unclear, don’t hesitate to ask for clarification. There is no shame in asking for assistance.
Selling banned products or services
● Selling prescription drugs without a doctor’s note or prescription (a relatively recent rule change).
● Selling a product that is not legal in your country.
● Selling a product that is not legal in the country of your customer.
How can you reduce your risk?
- Research your payment processor before signing an agreement.
- Check with the processor to make sure your business doesn’t fall into a prohibited category. They’re reputable and well-established.
- Check with the processor to make sure your business doesn’t fall into a prohibited category. For example, some processors don’t work with companies that sell or promote prescription drugs or medical devices.
- Double-check your sales channels; make sure they meet compliance standards.
- Make sure your sales channels are secure and able to recognize and prevent fraudulent transactions.
Takeaway: Know how to avoid getting flagged as high risk by being familiar with the rules, being honest about how you do business, and paying attention.
Conclusion
We hope this article has given you a better idea of what to expect when processing credit cards. Businesses that work with payment processors should always do their research and be careful not to break any rules.
If you find yourself in trouble, it may be time to contact an attorney who can help you understand your legal rights and responsibilities during this difficult time (and hopefully avoid getting suspended again)!
