Forum Moderators: buckworks
Now for my dilemma, our merchant account provider seems to think that we've have grown too fast. There exact words were "we have never seen anyone grow this fast". As such, they think we must be either scamming them or getting scammed ourselves.
In order to protect themselves, they have frozen our merchant account. Of course, we can still charge more cards. We just can't get the money deposited into our account, unless we put $100K into an escrow account. That's right $100K, and we can't get it back until April or May. Now we are talking about $40-50 orders, not $2,000+ electronics purchases. Not exactly the highest threat for fraud; not to mention, we have only had 1-2 chargebacks in our entire history.
So to my question, how many of you have experienced such a situation before? We feel as though we have been taken hostage by our merchant account. The only solution we have found is to switch merchant accounts, but I was hoping someone might have another solution that has worked for them.
TIA
YES I have also been held hostage before, there is nothing you can do, neither could we.
Just get another account as soon as possible, the bestand safest solution is to have multiple merchant accounts and spread your turnover.
ALWAYS, make sure that you explain what you do and the expected turnover "is at present" but "could be" within a short space of time.
Midge
Always have a 'plan b'....in this case, always have 2 merchant accounts, going into seperate bank accounts in different banks.
If the bank ever makes a boo-boo (and trust me, it happens!), they have the right to take money from ANY account you have in their bank.
2 of everything (at least) keeps you safe.
Also, in your situation, when you go looking for a new processor, you're going to find out that being successful scares the hell out of them.
NO chargeback problem, several years experience, etc....it simply doesn't matter to them.
Anything over about 20,000 a month in sales, and they treat you like a crook.
I'm looking into running two merchant accounts, but it looks like it is going to be a giant headache. Are you all suggesting to use multiple merchant accounts at the same time? Or do you just keep an extra as backup?
It seems to me that I would have to run the charges 50-50 between the two accounts. Otherwise, when we need to use the backup account the bank is going to wonder how we've gone "from rags to riches" overnight.
And I thought I would be spending the beginning of November drumming up traffic not dealing w/ bankers ;)
Another option is a "third party merchant account" the setup time is fast but you pay through the nose for their services, here you really do need to shop around.
In my business revenue can be between €3500 - €5000 per day
explian that to a banker and convince him you are not washing money or doing some other illegal activity.
The main problem is trying to get over to a banker the immense potential in internet selling and that the world is your market place, not just a high street store.
Good luck and goo hunting.
Midge just backed up another point I was trying to make...
After talking to tons of these companies over the last 5 years, 20 grand a month seems to be the magic number, even when dealing with banks/processors who are HUGE.
If you're doing more than that, it sets off their radar. If I was a bank, I'd much rather deal with Midge doing a Million bucks a year (because she's SUCCESSFUL), than some guy doing $3000 a month in gross sales and that probably can't pay his electric bill.
I'm still amazed it's the only industry that seems to penalize you for being successful!
Luckily, I have found a merchant processor that was founded soley to work w/ online merchants. They understand that we are in a hyper growth period, and aren't AS scared as everyone else.
However, they are still scared. Luckily, they are more or less local so I was able to bring in the CFO and risk mangagement guy to show them our operation. After they saw that we were actually shipping out merchandise, their fears eased a bit. Now I just have to convince them to give me a large enough monthly cap.
I do not understand why so many processors cap accounts. Why would a processor want to penalize their merchant for success? We push our merchants to market harder and increase their sales...I really don't understand, unless a processor is VERY small, why they would do this...any ideas?
James
Let's say you have a rate of 2.02%, and the processor has to pay the Interchange rate of around 1.5%(?), that only leaves .52% of the transaction for gross revenue. On a $500K / month account the proccessor only makes $2,500!
As such, I can understand why they are so tight w/ their money. I know I'll never risk $500K to make $2,500. Of course, I have oversimplified their revenue streams. But even w/ all the other fees added in, it still seems like a huge gamble.
Anyhow, my problems with the caps are not because they exsist, but rather the manner in how merchant account providers enforce them.
I agree with the fees part - didn't think of that. However considering the huge volume that a typical bank deals with (am I mistaken here?), all the $500K "crooks" and "squeaky cleans" would still pretty much abide by the law of averages, just like the $50K ones.
Anyway, red flags seems to be raised on much (unreasonably) lower level
Also, do any mailing to your customers? If so, get your business type listed as a mail order merchant instead of online sales. You'll get better rates and you won't pop up on the radar screens so readily.
Also, watch the chargebacks. For some of them, there is absolutely nothing you can do, but you should not have customers unable to recognize you for a reason code on a chargeback. Most merchant accounts pay a *fine* to Visa/MC when you have a merchant. They pass a little of that fine to you - usually between $15 and $25. For each chargeback, my 2 merchant accounts were fined $80 and $85 respectfully. They passed to me $20 and $25 each time. With slim margins and high chargebacks they will drop you because they will start to lose money.
If you go through the bank backing the merchant accounts you will get much better terms. We have recently went with a large bank and now have *no* upper limit each month. Of course, we had to provide a ton of information.
I once had a merchant account frozen because we had a large quantity of a product come in which had been on backorder for about a month.
We thing began charging all the customers who had the ordered the product, been contacted by us, and knew exactly what was going on.
So, we began processing a ton of orders - all for the same amount (yes, we were naive then!), and the processor froze our account.
It took several days and lots of documentation to convince these people about what was going on. Even explaining to them that we were DOING THE RIGHT THING by NOT charging the customer(s) until the product was actually shipping did not seem to help.
Finally, they gave in. I explained to them that this scenario would happen again, and they promised they would 'make a notation' on the account so we would never have this problem again.
I set up another account with another processor, just in case...
Sure enough, a few weeks later, another product came in off backorder, and it happened again. I called them, and they couldn't find any notations on my account about the previous conversations.
Needless to say, I dropped them. By already having a backup in place, business went on as usual.
We now have backups in place for everything.
