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.


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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.

  6. Felisza Nichols

    I have experienced this problem of making money and having funds held with 4 different times by, First Data, Intuit, Flagship. First Data is the processor to these providers and most of the providers out here. I have since filed a complaint with the Florida Dept of Agriculture and Consumer Affairs mediation division to mediate with First Data to get my monies back. Mr. Parker I’m sure you are just reporting what you know, but these companies practice unsavory business. There are thousands of these same complaints online and ones that have been mediated and settled so one needs to begin to raise an eyebrow. They hold these funds for any reason they want. We have been told various reasons and none of them make sense. I sell hair extensions. They knew when I signed u what my monthly gross could be because you have to give them a limit yet they still froze me and kept my money. I am a risk, really? Flagship told me if I gave my customers their product shipped it then gave them proof, they would release my monies. They haven’t and it’s been over 6 months ago. How can a small business person or any business owner stay in business this way. Intuit held my money and told me to tell my customers to file a complaint with their bank to get their money back. I had to come out of my pocket to buy $2000 worth of hair to keep from losing those customers and they still have my money. What’s worse is they sent me a 1099 so now I have filed taxes on income I haven’t received,and now have to fight to get it, so I will be also filing a complaint with the IRS. How many peoples monies do they still have who they gave a 1099 to pay taxes on. This is ridiculous and it’s time for something to be done. They are getting away with it. I advise people to contact your State Attorney General Office. They can investigate and proceed to shut them down, file a class action lawsuit etc. See if there is a Dept of Ag & Consumer Affairs office where you live. This is the State Agency not the USDA which is Federal and has nothing to do with consumer affairs. The state agency is who assists consumers with scams and monitoring of some industries within your state. If I can’t get First Data to mediate and pay me then I will have to hire a private attorney. More money spent to get what I have worked hard for. I will still be going to my State Attorney General to file a complaint and IRS. Nothing is being done about this because YOU are not doing anything about it. I don’t know about you all, but I am tired of bully’s and I want my money.

  7. Chris Jernigan

    I just used square for the 1st time ever and ran a $6,000+ transaction through it simply to make it easier for my customer knowing I am going to take the $240+ hit on the fee. Little did I know they would hold $4000 of the money until an undetermined amount of time? I also did not know there was no way for me to physically contact a human if there are any issues or problems. I am at the mercy for someone to check their inbox and contact me back. Business moves at a much faster pace than Square does. I am a small business just getting started and cannot afford to wait for Square to release my funds when they get around to it. I need it now. I would recommend square for small transactions but not for large transactions at all. Not unless you want to wait a month or more to get your money. It is a ridiculous process on their part. You would think they would want the larger transactions to gain more revenue. Their business model doesn’t reflect this though. I am in a real bind now to try to make my customer happy while waiting on Square to ” Square Up” ???? I have no idea if or when this is going to happen? Does anyone know of a better card reader type service that doesn’t have these issues?

    1. Phillip Parker

      Hi Chris,

      It’s doubtful that any provider, either mobile or otherwise, will allow you to run transactions of that amount without intervening. Generally speaking, almost all providers would require you to establish a cash reserve to protect themselves from fraud and chargebacks. Here is a list of our best credit card processors, but be sure to inform them of your need to large ticket transactions before you begin running transactions.

  8. Sharon

    I have been processing with Summit Merchant Solutions and last year, they decided to start holding funds on some transactions over $1000. Then they make me fax them a copy of my contract for services along with the credit card slip. Then they contact my customer to prove the charge is valid.

    After watching the presentation, I am left wondering why my merchant account is holding funds on a regular basis. We have been in business for over 20 years. My parent company has been in business for 53 years. In the 5 years that I have been running this business, I have not had one chargeback or fruadulent charge to my account. I don’t know why Summit Merchant Solutions would consider my transactions as risky?

    We are in the event/wedding industry. We rent tables, chairs, canopies, dance floor, etc. for weddings & events. A typical order is in excess of $1000, yet they have my limit at a low $100 so any transaction over $100 can essentially be held until they veirfy the transaction is valid.

    We are a small business & only employ 1-3 people to help so I do not have time to prove charges each week to my merchant services company. I see that Summit has a D+ rating, however I think it should be a complete FAIL!!!

  9. Donald Lasker

    This is a week later and I still have no money I own New Start Thrift Shoppe, we get donations from the public and sell them in our store. we also clothe and more homeless Mothers and their kids. We have processed about $700.00 with Pay Anywhere and bottom line is they simply refuse to give us our money. 11 emails, countless conversations, 30 or so phone calls and about 15 emails FROM them, to no avail. looks like the big guy wins again, I just hope I can stop another Company from dealing with this very dishonest company.

    1. Jeff

      Donald. Had the same exact issue with the same company. I went through he application, underwriting, and had my account approved. Processed three transactions for just under $1000.00. After not receiving the funds for 5 business days, I contacted them and was told my business was considered high risk (Travel). I asked them, if they are not going to send the money to me, than please just refund my customers and I will just have to invoice them and receive another form of payment. They actually refused, they said “at this time we are not going to send the money to your account and we will not process any refunds to the cardholder for 180 days.” Seriously? So apparently they have a license to steal? I have no idea how they can be allowed to stay in business.

  10. Donald Lasker

    I have a Thrift Store raising funds to help homeless Mothers with kids. We processed about $700.00 with Pay Anywhere and they simply stole the money, have phoney reasons why they wont pay, such as the main one they use a lot “oh you have only two zeros in your account number and we have three. hey used this 11 times ib the last 10 days

  11. sandra

    If the marchant companey hold the funds then when i should i can axpect they clear my account or in which they not pay at all

    1. Phillip Parker

      Hi Sandra,

      Every company has different policies regarding the reasons they place holds and the length of time they place them. Generally, most will release holds within 30 to 90 days but, in some cases, the hold may last as long as 180 days.

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