Why Merchant Accounts Are Closed : Chargeback ExpertzNew Business ConsultingUpdated on Aug 3, 2015 View more like this | Visit SAINT GEORGE, UT | Contact Chargeback Expertz |
Suspicious Merchant Activity:
There are several ways merchants might choose to breach the terms of their merchant processing agreement. This might include depositing transactions on behalf of another merchant or maintaining multiple merchant accounts (acquirers usually require merchants to refrain from simultaneously having active accounts with other acquirers).
Fraud:
If a merchant is committing fraud, the acquirer will understandably terminate the account. Examples of fraud include misusing credit card information, making fraudulent transactions, overcharging customers, not delivering merchandise and using misleading advertising.
Chargebacks:
Chargebacks, or forced credit card refunds, are the leading cause of terminated processing agreements.
There are several ways merchants might choose to breach the terms of their merchant processing agreement. This might include depositing transactions on behalf of another merchant or maintaining multiple merchant accounts (acquirers usually require merchants to refrain from simultaneously having active accounts with other acquirers).
Fraud:
If a merchant is committing fraud, the acquirer will understandably terminate the account. Examples of fraud include misusing credit card information, making fraudulent transactions, overcharging customers, not delivering merchandise and using misleading advertising.
Chargebacks:
Chargebacks, or forced credit card refunds, are the leading cause of terminated processing agreements.
The Role Chargebacks Play
It is important to remember acquiring banks and processors are like any other business; they must carefully assess risk in relation to profitability. Therefore, a processing agreement will be terminated before the risky merchant can become a liability.
Unfortunately, “risk” is a subjective term; it is defined differently by each processor and bank. However, it is safe to say all payment industry members definitely view high chargeback rates as risky.
The majority of canceled merchant accounts are caused by excessive chargeback levels. The networks usually require merchants to keep their chargeback ratio below 1-2% (be sure to check the specifics regarding MasterCard chargeback thresholds and Visa chargeback thresholds).
However, it’s probable that a merchant account will be closed long before the card networks’ thresholds have been breached.
It is important to remember acquiring banks and processors are like any other business; they must carefully assess risk in relation to profitability. Therefore, a processing agreement will be terminated before the risky merchant can become a liability.
Unfortunately, “risk” is a subjective term; it is defined differently by each processor and bank. However, it is safe to say all payment industry members definitely view high chargeback rates as risky.
The majority of canceled merchant accounts are caused by excessive chargeback levels. The networks usually require merchants to keep their chargeback ratio below 1-2% (be sure to check the specifics regarding MasterCard chargeback thresholds and Visa chargeback thresholds).
However, it’s probable that a merchant account will be closed long before the card networks’ thresholds have been breached.
