COVID-19 and Your Business Credit Limit

Any part of running a business includes having a merchant account. You have to be able to make and take payments, and in turn, use those funds to pay your employees and vendors. But, what do you do if the money submitted isn’t going to your bank, but instead is being held for credit review?

Companies, like consumers, have credit limits. These limits are established to protect the banks and the merchants, and most are based off historical data on number and value of transactions that the merchant supplies on their application.

Seems straightforward. Until it isn’t.

Why Should I Be Worried if My Online Business is Booming?

As the COVID19 global pandemic impacts what was routine life, consumers have gone online, and industries are seeing tremendous lift in transaction volume. According to an analysis by ACI Worldwide, “Transaction volumes in most retail sectors have seen a 74% rise in March compared to the same period last year, while online gaming has seen a staggering increase of 97%.”

What do you as a business owner do when in the span of a few days your transactions have tripled? You probably shout a big “thank you!”

What does your merchant provider do? They flag your account as you have exceeded your daily credit amount and they put the funds on hold, where they stay held until a risk team can assess it. They do this for a number of reasons – fraud protection, chargeback protection, and, well, you tripled your transaction value, therefore exceeding your limit.

What’s The Impact of a Hold?

Your customer will not be impacted by this, as payments will still go through. However, those payments won’t come back to you, as on the back end, it’s now in risk review, which means it’s not going to your bank. It will be as if you weren’t open for business.

What Steps Can You Take Now?

Call your merchant provider or reach out to your account representative. Let them know you’re seeing an increase in transactions. Ask them what they recommend, or what steps you need to take to increase your limit. If they’ve already put a hold on your account, what can you do to remove it (usually they require a letter from your bank.)

Also, be proactive. You’re likely busy trying to fulfill the giant surge in online orders and not realizing this surge equates to paying more for payment processing, so your revenue lift may not be what you thought it was going to be.

While it may not seem like it, now may be the perfect time to switch to a payment processing company that doesn’t bundle their rates. We’re here to help. If you have questions, please reach out to us via our contact us form. We’re answering as quickly as we can.