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How to Avoid Account Terminations, Freezes, and Holds

As a business owner, you know there’s nothing more frustrating (and potentially catastrophic) than account terminations, freezes, and holds. Not only do they interrupt your cash flow, potentially for days and even weeks at a time, they also damage your reputation with customers and partners, which can be an even greater impact on the long-term integrity of your business. It’s in your very best interest to avoid account terminations, freezes and holds.

Of course, this is a lot easier said than done. You know that keeping purchases coming in is as vital as keeping your business’s front door unlocked – but how exactly can you protect yourself against problems? In order to learn how, it’s first important to learn why these problems happen.

Why Do Account Terminations, Freezes, and Holds Happen?

All in all, it’s worth remembering that account terminations, freezes, and holds ultimately are triggered because there’s a concern for the safety of your customers or your business. It’s the obligation of a merchant processor to help hold businesses accountable and ensure money doesn’t end up in the wrong hands. Still, with over 30 million businesses in the United States, 99.9% of them being small businesses, it’s obvious that these kinds of financial burdens are no laughing matter. To understand this further, here’s a breakdown of these financial terms:

Account Terminations

Easily the most detrimental of the three, an account termination is when a bank or payment processor completely closes a business’s account. This is the worst-case scenario and banks typically only resort to this when freezes and holds don’t work — more or less like a third strike. It’s quite difficult for a business to open a new account elsewhere when this has happened, because payment processors share terminated merchant files (TMFs) with other payment processors to protect them from any potential harm.

Account Freezes

An account freeze comes after a hold but before an all-out termination, effectively serving as a more serious warning to the business. It’s exactly how it sounds: The bank freezes, or halts, a merchant’s ability to accept or make payments. This can happen because of suspicious activity, because the payment processor suspects wrongdoing by the merchant, or because of excessive chargebacks, as a few examples. The processor can lift freezes once the investigation is complete. But during the investigation, customers cannot make card payments.

Account Holds

Of all three options, account holds are the most frequent but thankfully the most easily solvable. An account hold puts a pause on a portion of the payment. The funds still belong to you as the business owner, but they’re temporarily held elsewhere by the payment processor to ensure there are no fraudulent activities or excessive chargebacks happening. Holds can also happen on high-value transactions as a precautionary measure. They’re often automatic, and they rarely last long. They also don’t prevent customers from continuing to make credit card payments to your business.

Avoiding Account Terminations, Freezes, and Holds

There are steps you can take in order to prevent these situations from happening. The importance of these steps cannot be overstated: they keep your business running smoothly and protect your reputation as a trustworthy merchant.

Have a Strong Business Model

First, there’s nothing more valuable than having a sound business model. Not only will this prevent chargebacks, but it will also keep your merchant account financially healthy. Plus, with 51% of small businesses claiming to have increased their online sales and interactions in the past year, you know that this financial health is something you should take seriously. By clearly communicating with your customers, making sure they completely understand your offers, and clarifying your payment processing terms to the best of your ability, your business model will be strong and you’ll be able to better prevent these issues with your account. By far the biggest cause of valid customer chargebacks is a poorly understood or confusing offer. Sadly some merchants in recurring revenue verticals, such as nutraceuticals, think that they can make more money by using deceptive trial offers or confusing recurring pricing models. Tricking customers into agreeing to pay more than they expected is never a good business strategy. Continuity subscription programs are a great business model as long as your customer clearly understands what they’re signing up for.

Make Sure Customer Service Is Easy to Contact

Almost as integral as a strong business model is a strong customer service department. Making sure your customer service department is easy to contact is the first step. This is the first place customers with payment issues will call, and if they can’t get in touch with you, then it’s only going to make matters worse and make your business look that much less trustworthy. Surveys have shown that 78% of people who were wronged by a company will return if they’re shown great customer service – so it’s in your best interest to make sure your customer service department actually picks up the phone.

Keep in mind that if you’re outsourcing your customer support services, you’re still accountable for their performance on behalf of your brand. Make sure you’re working with a quality team that answers promptly and handles any payment disputes quickly and effectively.

Process Chargebacks Quickly

Another key step in preventing account terminations, freezes, and holds is making sure you process chargebacks quickly and without hesitation. It might sound like a painful burden in the moment, but this benefits your business in the long run. Stay in close contact with the payment processor when there’s a chargeback — always within 24 hours or less. This is especially important if you have a spike in chargebacks, as this can trigger elevated risk concerns by your processor.

If you’re noticing an especially large number of chargebacks, this doesn’t have to be a disaster. LOLA POS can work with clients to create an improvement plan to keep chargebacks down. This includes finding a new call center or customer service department, identifying and resolving issues within fulfillment centers, and enrolling in Fraud Wrangler, a service that specifically aims to automate the distribution of chargebacks.

Work With a Processor That Understands Your Business

Most fundamentally, it’s critical for you as a business owner to work closely with a payment processor that truly understands what you and your business are all about. All too often, accounts get terminated because processors don’t take the time to get to know their clientele or don’t properly vet their businesses, resulting in the kind of purging that only hurts businesses like yours in the end. In particular, “big box” processors often make it seem very easy to get a merchant account, but they don’t do the due diligence to ensure that they are setting you up for long-term success. LOLA POS is the merchant account that Works For You® and we’re your partner for the future of your business.

The Bottom Line: LOLA POS Can Help Protect Your Business From Terminations, Freezes, and Holds

At the end of the day, when the going gets tough, LOLA POS. won’t just cut you off like other processors might. We are committed to understanding how your business works and pride ourselves on being a friendly merchant account provider. Along with Fraud Wrangler, LOLA POS can help support the lifespan of your company by ensuring optimal customer service and minimal chargebacks. For more information, contact LOLA POS today.

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