fbpx

Speake with an expert: 801-405-9888

MY MERCHANT ACCOUNT HAS BEEN SHUT DOWN, NOW WHAT DO I DO?

My Merchant Account Has Been Shut Down, Now What Do I Do?

Table of Contents

In this day and age, businesses depend on credit card sales to stay afloat. If your company does business online, it needs to accept cards to ensure it’s paid for its services in a timely fashion. Your company typically needs a merchant account to accept credit cards, a line of credit that gives you access to the funds your payment processor receives from transactions. 

 

Some businesses might have more difficulty than others getting access to a merchant account. In some cases, a payment processor might terminate a company’s merchant account. If a payment processor thinks your industry is high risk, it might hesitate to give you an account in the first place or shut it down at the first sign of trouble. Knowing why a processor might terminate an account can help you avoid it.

Some Common Easons for Merchant Account shutdowns include

Why Was My Merchant Account Shut Down?

A payment processor might terminate a merchant account for a variety of reasons. You must adhere to your processor’s guidelines to keep your account stable and consistently processing payments. Some common reasons for merchant account shutdown include:

 

  • Chargebacks: Most credit card companies have policies in place to protect credit card users. One of those protections is the option of getting their money back if something goes wrong with a transaction, like if an item never arrived or was defective. A chargeback occurs when a credit card company refunds the money to the customer, taking it from the merchant. A chargeback isn’t the same as the merchant issuing a refund. While chargebacks are inevitable, an excessive number of them is a red flag to payment processors.
  • Fraud: Fraud is a broad category and can take many forms. A payment processor might suspect fraud if a merchant has many keyed-in — or card-not-present — transactions or if there are multiple customer complaints of items not arriving. 
  • Going over the limit: A merchant account is likely to have a transaction limit, which might be a few thousand to tens of thousands of dollars. If a business exceeds that limit, it can be a red flag to the payment processor, leading to the termination of the account.
  • Risk evaluation: A payment processor will evaluate your company’s level of risk when it first approves you for a merchant account. It might reevaluate your risk at a later point, too. A payment processor might consider your credit score, business age, account history and location. If any of those have changed since you first opened the account, the payment processor might decide that your business is at a higher risk. The products you sell and the cost of your products can also put you in the high-risk category.
  • Violations of the terms of service: Your merchant account has terms of service. When you opened the account, you agreed to abide by those terms. If you end up violating the terms of service and the payment processor finds out, it can cancel your account.

 

Keeping a healthy merchant account is imperative to your company’s ongoing success. When accounts are terminated, funds get frozen or held for 180 days — though that varies by provider. No matter how long your processor holds your funds, it affects your income. Choosing the right processor the first time is crucial to help you avoid account termination.

What to Do if Your Merchant Account Is Shut Down

Having your merchant account terminated by your payment processor can disrupt your business. You can’t accept card payments without a merchant account, meaning it can be difficult to operate an online business without one. If your account gets shut down, you can take several steps to find out what happened and what you can do to reinstate your account.

Reach out to the Payment Processor

After discovering that your account has been terminated, the first thing to do is to contact the payment processor to find out what happened. The payment processor might not explain the reason behind the termination unless you explicitly ask for one. Depending on the reason, you might be able to make a case for reinstating your account.

 

Even if the payment processor won’t agree to reinstate your account, ask it to provide you with a written statement explaining the termination. Also, verify that your information has been put on the Member Alert to Control High-Risk Merchants (MATCH) list. If a payment processor terminates your merchant account, it’s required to put your business on the MATCH list. Being on the list changes the process you go through when opening a new merchant account.

Save Your Statements

Save Your Statements

If you haven’t done so previously, it’s a good idea to log into your account portal and download your account statements for at least the past six months. Your account statements provide proof that your account was in relatively good standing until the shutdown. You can use them to demonstrate your business’s trustworthiness and reliability when applying for a new merchant account.

Be Professional and Honest

No matter why your merchant account was shut down, remember to be honest and professional during any interactions you have with your previous payment processor and any potential processors. If the termination occurred because of an issue with your business, own up to it and explain to any potential partners how you’ll avoid a similar situation moving forward. 

 

Being professional means responding to any inquiries from potential payment processors promptly and providing the correct information when asked. It’s better to be upfront about your situation when you’re looking for a new account, as a payment processor can quickly discover what happened with your previous account. 

 

As you look for a payment processor to work with, consider companies that specialize in partnering with high-risk businesses. High-risk merchant accounts provide stability to companies that would otherwise be at risk of having their accounts terminated.

Examples of High-Risk Industries Include

Low Risk vs. High-Risk Merchant Service Providers

When selecting a merchant account, you need to make sure you find a payment processor that knows your industry. If a company is processing payments for a retail clothing store, its risks will be different from those that process online firearms sales. Understanding the risks of your industry will play a pivotal role in selecting a provider because many payment processors will only work with certain levels of “risk.” 

 

Your industry plays a significant role in determining your company’s risk. Any highly regulated industry with a high number of chargebacks or that frequently causes the bank to take on more challenges is considered high risk. If you find your business fitting within that classification, find a merchant account provider that can support your business.

 

Examples of high-risk industries include:

  • Adult: The adult industry is high-risk for several reasons. It’s often subscription-based, which can lead to a lot of chargebacks. There’s also the controversial nature of the adult industry that gives traditional payment processors pause.
  • Ammunition and firearms: The firearms and ammo industry is highly regulated, and there are limits on who firearms dealers can sell to. A payment processor might not want to risk any violations and is likely to avoid working with a company that sells firearms and ammo. 
  • CBD: Cannabidiol (CBD) is legal but highly regulated, which can give traditional payment processors pause. Many CBD companies are e-commerce only and don’t accept physical cards for payments. That can put them at an increased risk for fraud, making the industry higher risk than others.
  • Coaching and seminars: Career or life coaches can often end up in the high-risk category because of the cost of their services and the volume they sell. A career coach who sells $5,000 tickets to their seminars can easily exceed their transaction limits. If clients aren’t happy with the coach’s services, they can demand a chargeback from the payment processor, making many processors avoid coaches and consultants.
  • Credit Repair: Similarly to career and life coaches, credit repair services are considered high risk because of the cost of the service. Additionally, many credit repair programs operate on a subscription model, which is deemed to be risky.
  • Health and wellness: The health and wellness industry, particularly businesses that use a multilevel marketing model or sell nutraceuticals or alternative supplements, can be high risk due to the potential for many chargebacks and potential customer dissatisfaction.
  • Memberships and subscriptions: Subscription-based industries, such as product-of-the-month clubs or streaming services, are often high risk because the card isn’t presented during the transaction, and there’s a high rate of chargebacks. 
  • Travel: The travel industry can be high-risk due to the high cost of travel and the risk of cancellations and chargebacks.

 

In some cases, whether a company is deemed high risk or not has little to do with its industry. A company with a poor credit history or high sales volume can also fall into the high-risk category, no matter what type of product or service it sells.

How to Avoid Merchant Account Termination

The best way to avoid being shut down is to make sure you choose the correct payment processor the first time. Understanding the risks of your industry will be a critical factor in determining where to place your merchant account. 

 

If you’re in the travel industry, one of the primary risks you face is high ticket prices, which can push you over your transaction limits. If you’re in a highly regulated industry, such as CBD, firearms or vaping, violating local and federal laws can put you at risk. To keep your merchant account from getting shut down, look for a payment processor that knows the ins and outs of your industry.

 

Communication is the key to avoiding account shutdown. When you first sign up for your merchant account, provide the payment processor with an estimate of your monthly transaction volume and the average value of each transaction. If you anticipate hundreds of sales worth $500 or more per month, the processor needs to know that. If you tell the payment processor your sales average will be under $50, then you have a series of $500 or higher transactions, alarm bells will go off for the payment processor. 

 

When you open a new merchant account, a proper payment processor will enroll you in “chargeback protection.” Chargeback protection can alert you to any chargebacks in process and allow you to respond to them. It can also help detect fraudulent chargebacks and reduce their occurrence.

 

Your payment processor should also underwrite your account correctly. The correct underwriting helps mitigate risk on your end, as well as for the banks. Processing banks love good merchants, and here at Zen Payments, we help you find the best solution for your processing needs.

Why Zen Payments Is Different

When someone thinks of credit card processing, they think of Stripe, PayPal and Square. The issue many people find is that these companies only service low-risk verticals. The payment processors often have an “Instant Approval Process,” which overlooks risk. A high-risk merchant can open an account with one of the big three payment processors, start accepting payments, and a month later find out that their account has been terminated. The merchant is often left in the dark, with no understanding of why their account was shut down. 

 

When most payment processors discover that a company is accepting payments in a high-risk space, they are going to shut you down, hold your funds and leave you without a payment solution.

 

The key to high-risk payment processing is finding a bank that understands your needs. High-risk banks will underwrite every account before they approve it.  A high-risk payment processor investigates the merchant’s website to ensure it complies with every rule and restriction in its industry. A thorough investigation allows high-risk payment processors to keep high-risk merchant accounts active.

 

Zen Payments works with a network of more than 15 banks and payment processors, making it more than likely that we’ll find the right partner for a high-risk merchant. We have an approval rating of 98% and are willing to work with companies that have been turned down by other processors or that have poor credit histories

 

We understand that high risk often means “high cost” for the merchants involved. We don’t think that’s fair. Zen Payments aims to provide our merchants with the best rates possible, giving their business a chance to grow and thrive.

Zen Payments Offers Merchant Account Help for High-Risk Businesses

Whether your merchant account has been suspended by a payment processor or you want to avoid having an account shut down, Zen Payments can help. We specialize in high-risk industries and businesses and will work with you to connect you with a payment processor that understands your unique situation. We also work to protect you from common issues high-risk industries face. 

 

Contact us today to learn more about how we can support your business.