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Payment Processors That Don't Hold Funds

Payment Processors That Don’t Hold Funds

If you’re looking for a payment processor that doesn’t hold funds, then you’re in the market for a high risk merchant account provider. These types of payment processors create custom accounts for multiple types of businesses. Each account has its own specific contract that can be adjusted to reduce funding holds.

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Reserve Accounts

The location where your funds get held is a reserve account. The reserve is set in place in order to have extra money in the event something goes wrong. Banks control the money in the reserve account, and although a merchant can see how much is being held, they cannot access it until a bank decides to release it. 


In most cases, reserve funds are predetermined in your initial merchant account contract. The bank chooses the amount during underwriting after assessing general risk factors associated with your existing payment processing history. In some cases however, they may freeze your account and halt transactions while holding the funds until they decide to release them.

How Long Can A Payment Processor Hold Funds?

In a situation where your account is frozen for review, a processor can hold funds for six months and sometimes indefinitely if they determine the money needs to be paid to customers. If your payment processor is holding funds, don’t count the days until you have the money back, this will cause headaches and slow down your growth. 


Instead, understand that they are often very slow to release funds so you should not plan to have that money back in your bank account any time soon.

Why Do Payment Processors Hold Funds?

Payment processors hold funds to maintain a low risk profile and ensure your customers are supported with funds if needed. Nearly every merchant account has some level of reserve account which is where money stays when they are holding it. In a healthy merchant account, a payment processor releases funds steadily over time while maintaining funds in the reserve.

Why Is My Account Frozen?

Your merchant account can be frozen for a number of reasons such as fraud, high chargebacks, or even having an MCC Code mismatch. 


  • Fraud – This is the most concerning issue for your merchant account because it means there are problems with the transactions you are receiving or the items you are selling. If you’re guilty of fraud, because you’re manipulating funds or engaging in the illegal sale of items, then you’re well aware of the causes. On the other hand, fraud can come from external sources such as friendly fraud, scammers or hackers.  
  • High Chargebacks – High chargebacks can be anything over 1.5% of your total number of transactions. If you exceed this percentage by a large amount or if you have multiple chargebacks in a short period, then your bank can freeze your account to investigate the cause. The best circumstance is that you are being flagged preemptively and that your chargebacks rates are on the border. In this case, you’ll simply need to work with a chargeback protection service who will show you how to prevent these issues, monitor possible events, and reduce them.
  • MCC Code Mismatch – If you claimed to have a different industry type, and are now selling something other than the products you told your payment processors, then there is a mismatch in your MCC Code. Once they find this out, they can freeze your processing and hold funds. 

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