Forum Moderators: buckworks
Funds are held for 4 weeks before we receive them, and I'm wondering if this is always the case. Can we expect this delay to be reduced as our volumes grow? Or is this set in stone?
Standard processors settle within 24 hours. The funds are then typically deposited into your account in 2 to 4 business days after that. So I would say it is normal to have the funds in your account anywhere from 3 to 5 total business days after the transaction.
Must admit when we set up I didn't spend a great deal of time looking at CC processors, I went with a name I knew.
The reason you would use their merchant account instead of your own is generally either:
- You chose not to setup your own merchant account (an unlikely voluntary choice, since it would generally have lower fees and you'd get paid quicker etc.)
or
- You wanted your own account but would not be able to meet the bank's criteria, or did not want to make any financial commitments etc.
By letting you use "their" arrangements with the banks, the 3rd party processors are taking a number of risks that their customers would act fraudulently, charge cards for goods or services not provided, or not be able to pay back chargebacks etc. If any of these happened then the 3rd party processor would still have to cover these costs to the bank!
But they still want to allow a greater number of new/small businesses to use their services, but need to protect themselves to some extent! They generally charge a higher fee as "self insurance" but also will sometimes set ceiling limits or ongoing retainers. It can particularly depend on what industry you are in what product or service you are selling.
By putting a 4 week delay on payment, they would be able to limit their liability if suddenly one of their customers charged lots of cards but never delivered the goods - the theory being that they were more likely to spot any potential problems in this 4 week period, maybe they spot lots of charge back requests come through etc.
It's not as insane as other posters make out. In fact, it can even apply to big name merchants who have their own merchant account - retailers, particularly Internet Retailers, have to make financial guarantees to the banks including lodging a deposit of 10s or even 100s of thousands of pounds!
Although after a good transaction history they can reduce the guarantees required, this is not to be taken for granted - see this Financial Times [specials.ft.com] article for an example of a company that was asked to increase their financial guarantee from GBP 30,000 to GBP 300,000!
jules.
It's not as insane as other posters make out
The original poster didn't mention that he didn't have his own merchant account in the original post. If he did have one, 4 weeks IS a little excessive. Without it, I'm sure you have less options. All that said, banks do have the upper hand in these things in any case.
I can see why a 4 week delay in there (great post julesn, and interesting FT link).
Time to do some more in depth research.
if you have a merchant account with your bank, they have a guarantee from you to cover refunds / chargebacks etc, so no need to make you wait for money
last time i checked, worldpay was 4 weeks, 2CO wanted a $1500 rolling reserve, EPDQ was 45 days - don't know if these have changed since then, but the point is that any similar setup will require funds to be held for a while.
worldpay can reduce the 4 week settlement period after you've been trading for a while - just ask them to review your account
for info, worldpay also have BankDirect which works like the normal WorldDirect service but settles to your bank account each night - no 4 week wait, think it's 1.6% for credit cards - you will need your own merchant account from your bank
It also depends on the regularity in sales. If a merchants processes 10,000 USD in one week and doesn't process anything in the coming 3 weeks, don't expect your money to arrive in week 4. Alarm bells will ring all over the place.
I still can't believe that there are merchants who expect payments to their account within a week when they use a third party processing. The processing company will ALWAYS determine the risk first. Requesting your money and pushing them to transfer your money will only make them more alert as this is a well known tactic from fraud companies.
Most scam companies used to contact the processor personally through all channels, fax, email and telephone and tell them a story about how they need the money to pay for expenses etc. Processing company would transfer the first statement weeks, company receives the money and is gone and chargebacks come in after 4-6 weeks.
THAT is the reason they hold your money. They have a 180 day risk on chargebacks and credits, that means 6 months.(!)
I wish more people read Julesn post. Can't we put that post in a blinking pop up or something so everyone can read it?
Which is not always as good as it sounds. Business accounts tend to charge as do some processors for the deposit, which could cost you up to $1 per day, just to get paid.
Others will (in the small print) hold on to your money for up to 6 months (the way they can work this is they state a 'rolling 5% over 6 months', which means you get paid 95% in 24 hours, 5% six months later). If you make less than 5% on your products, then that is a loss for six months! (I make less than 5% on some of my products).
WorldPay just need an email to renegotiate a new deal, charges and timescales are all negotiable. Note that you need to process a reasonable amount and chargeback levels must be low before they consider this.
You should weigh up both options - WorldPay are still the best for us. Oddly, proper merchant accounts quote about 0.5% higher than we pay at WorldPay at the moment (then we have to pay another company for their online processing system - we process far too many to do them by hand).
What works for one company, does not always work for another.
They reduced my rates the other week when I asked so hopefully they'll do the same with the remittance delay.
Email risk at worldpay dot com - they just reduced our remittance delay from 4 to 2 weeks - much better!
Me too! Well, this was a useful thread :) They're gonna pay me an extra two weeks worth of remittance next week to catch up!
