A merchant account is a form of business account that enables businesses to both accept and process card transactions. Merchant accounts typically require a partnership between a business and a merchant acquiring bank that supports all communication during an electronic payment transaction. 

Depending on whether the merchant enters a merchant agreement with an acquiring bank or via an aggregator (payment service provider), the contractual agreement binds the merchant to obey the regulations as set forth by the card associations. 

How Do Merchant Accounts Work?

When a customer uses their credit or debit card in order to pay for a transaction, a card processor sends that account information to your merchant account. Your merchant account provider will then verify whether there are sufficient funds with the customer’s card issuer. Once that has been confirmed, the merchant account provider will release those funds for the transaction to your business.

You Must Play By The Rules

Opening a merchant account opens up a world of possibilities for your business. However, merchants must know that having a merchant account comes with a great number of responsibilities.  

It cannot be stressed enough that it is essential that the merchant must ensure that they are following all the rules and regulations as set up by the credit card companies they will be working with. 

Failure to abide by these rules and regulations could result in your business being placed on a MATCH (Merchant Alert To Control High-Risk)  or TMF (Terminated Merchant File) list. 

The TMF and MATCH  is a list assembled and managed by Mastercard where business owners have had their merchant account terminated in the past 5 years for any number of reasons.

These lists are useful for banks as it protects them from approving merchants that could create a loss. Merchants who are on these lists get rejected for merchant accounts when they try to apply for them. 

TMF and MATCH lists essentially work as a “blacklist” against merchants whom banks have designated to be “high-risk”. 

More Reasons That Your Merchant Account Can Be At Risk

There are a number of reasons why your merchant account could be at risk of being shut down. Noticing when these issues are making an appearance is vital to avoid having any interruption in your ability to process card transactions. Here are a few to watch out for:

  • Violating Terms Of Agreement

As previously mentioned, when you first applied for your merchant account, you would have been presented with a series of guidelines in which you had to agree to follow before you signed.

Some guidelines specify high ticket item amounts, volume limits, and other industry requirements. Merchants must notify their processor before processing above the limits originally agreed upon.  

  • Chargebacks

Excessive chargebacks are another common culprit for merchant account closures. It is best to keep chargeback rates below 1%. Other tactics to employ include: Using authentication methods like 3D Secure, keeping detailed records of all card-based transactions with date and time, as well as IP addresses.

  •  Possible Fraud

Banks want to minimize risk and are on the lookout for fraudulent activity. Examples include a high number of keyed in or forced transactions. Fraudsters can swipe credit card information a lot easier than having to steal the card itself. Therefore, keyed in transactions have more risk than in-person transactions. 

Honesty And Compliance Pays

The best partnership between a merchant and a merchant account provider can be characterized by having an open and honest business relationship. If your merchant account is experiencing account freezes, a high number of chargebacks, a high number of declined transactions, then it’s time you get in contact with your provider. 

They are more than equipped to provide you with the tools and advice needed to tackle these issues at the outset, before they become insurmountable problems.