Why Credit Card Processors Hold Funds


Below is an animated presentation providing an overview of the reasons credit card processors and merchant account providers place holds on merchant funds. Please feel free to leave your questions and comments on the comment section below.

 

Why Credit Card Processors Place Holds on Merchant Funds

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About the author

Phillip Parker

Phillip Parker is a former merchant services agent turned small business advocate and the author of "Fee Sweep," which teaches merchants how to dramatically lower their processing rates, eliminate junk fees, and avoid fine-print scams. He founded CardPaymentOptions.com to help merchants enact positive change in the credit card processing industry.



 
Phillip can help you find an ethical and honest processor that will offer you great rates. Click here to request a free provider consultation.

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17 comments

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  1. Gary Lincoln

    Consumer Beware! Read the fine print!
    I too am being ripped off! Intuit “Go Pay” set my account up in minutes. They sent me a card reader and set my account with a $10,000.00 monthly limit. I am a Plumbing Contractor in business for 22 years now.
    I switched to “Go Pay” for the lower rates. I ran the first three transactions for a total just over $1,700.00 . Followed by a fourth for around $880.00. I recieved an E-Mail a few days later telling me they are holding my first transactions for fraud investigation. They asked for proof of sale and other info. I am not sure it is legal for me to send this info to them? Don’t my customers have the right to privacy? After waiting a few days, I realized I had to send this info if I wanted to get paid, So I did. A few more days and the fourth trans. went through for the $880.00 but still nothing on the first one. A week later and I ran one for around $100.00. Now its been 23 days since the first use of the card reader and no $1,700.00 or the $100.00 . I called Intuit and they said my money is now on a 270 day hold. I have repeatedly asked why and am only told they will not discuse the reasons. My account is now closed with them but they refuse to tell me anything. I asked if I could have my customers cancel their card transaction so I could get paid via check or other and they said sure. After asking one of my customers to do just that his bank said no, they will not cancel the charge without a vaild dispute. All the charges have cleared the card holders accounts but Intuit refuses to pay me until the 270 day window and even then they say it will be reviewed for (possible) payment. There has been no fraud, no charge backs, no nothing! I had a Merchant account with key bank for 8 years prior to this and never had a charge back, Not one! Not even a minor complaint! I have to say, This is wrong! There is a need for more regulation on these people. They get to hold your money for as long as they like without answering to anyone! I pay for the materials installed for my customers so I am out materials, labor, profit and sales tax. Since they are allowed to hold your funds, why are we not intitled to the interset they are gaining from this? After reading how many people they do this too, they must be making a killing on other peoples money! Consumer Beware! Read the fine print!

  2. Lisza

    Holding account monies. I was told by all vendors including paypal that have held monies they can hold it up to 6 months to allow for chargebacks. It’s been over a year for me and I just got back monies of almost $4000 from 2 merchants. I am currently still fighting 2 more. They ignore you, i’ve gotten emails to people whose email accounts dont work, to contact in reference to my complaint, i’ve gotten oh let me check into that and call you back and it never happens. I’ve filed a complaint with my state consumer affairs office, First Data ignored them. Case closed so I had to hire a private attorney. I don’t think Suntrust/First data will respond to them either so I am also constantly calling to get resolve. This is ridiculous and I will be going to my state attorney’s office next. I think this needs to be escalated to a congressional look into these practices because most of they are not right. Alot of us are not committing fraud. Mr. Parker you told someone to let the merchant know how much they planned to process. Well I can’t remember if Square asks that question but all other merchants I have dealt with do. I told them, and if I made $1000 in a day or $2000 in a week I was shut down. They do not play by the rules except their own truly, and unless you or anyone has gone through this you can state what should be, but they are not running their business by what should be. Suntrust had the nerve to even 1099 me in 2013 for income I never received from sales in 2012, and now they are telling me owe we see you only have $1 left. Suntrust and Flagstar has kept my money for over a year until some kind of compliance fees came out. My monies should have been returned let alone have fees taken out on a closed account. That’s robbery. So now I guess I will have to go to my state attorney’s office and this has been going on since the end of 2012.

  3. Linda Sale

    Is it legal for a merchant to add a fee to a customer invoice who wants to pay by credit card?

    1. Phillip Parker

      Hi Linda,

      The short answer is “yes,” but the fee can’t be more than what the merchant pays. For a more detailed answer see: Merchants Win Surcharge Battle – Here Are The New Rules

  4. Pedro Alcala

    Hello, We have a fully Licensed and bonded vacation travel company. We started operations 2 month a go and we are working with Authorize.net. after over $87,000 in sales we had 3 charge backs. They decided to hold the money from our creditb cards transactions tarting today because we are been investigated by the processor for fraud?? BS. They state that they have been receiving a large amount of calls in regards to our company, which is total false in my opinion (not sure). all i know is that we a serious company we are not fraudulent and we are starting a business venture for the first time and now this is going to affect our company in a way where we are not going to be able to cover our operations with our money on hold. How can i dispute this and solve the problem ASAP,

    Thanks,

    Pedro Alcala

    1. Phillip

      Hi Pedro,

      Unfortunately, you give the processor the right to withhold funds for risk assessment purposes when you sign your merchant account agreement. The best action you can take is to contact the customers to inquire as to the reasons they filed a Chargeback request and ask them to retract their request. Once you have determined the reasons for Chargebacks, eliminate the problem so that you don’t get terminated by your provider. This is very important because once you have had a merchant account terminated by a provider, you risk being added to the Terminated Merchant File (also called the Match List). Getting added to the Terminated Merchant File can be a serious problem for your business as it could make it impossible to get credit card processing services from other providers without incurring extremely high fees.

  5. Jose Gamboa

    CAN A CREDIT CARD COMPANY HOLD YOUR FUND FOR MORE THAN 180 DAYS?.

    1. Phillip Parker

      Hi Jose,

      Check with your state’s Attorney General. The laws can vary by state.

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