Merchant account closed, what can I do?
Your merchant account has been closed and you are wondering what to do next? The good news – you always have options.
First it’s important to know the reason your account has been closed. If you don’t know, call your merchant service provider and get as much information as you can with regard to the closure. Depending on the reason for the closure, I have some suggestions below.
Merchant Account Closed Due to Inactivity
This is a simple fix. Just explain to your current processor the reason for the inactivity and ask that they reinstate the account. If the account has been closed for less than a month you can usually turn the account back on without any additional paperwork. If the account has been closed for a longer period, you may have to submit a new application. It will depend on the provider.
Merchant Account Closed due to Rejected Fees
This is a tricky one as it’s a slippery slope. If the month end fees are rejected you typically have one month to pay the back fees. If the account is not current for the second month, the account is typically suspended and then closed as some point in the future. Depending on the length of time the account is delinquent and the efforts that are made to catch up, determine the difficulty of resuming the account. The worst thing to do is to ignore the past due balance. Depending on the merchant service provider, they could place your account on the TMF (Terminated Merchant File), which makes it very difficult to get another account.
Merchant Account Closed due to Excessive Chargbacks
This is the most sever account closure. All of the liability associated with a merchant account stems from chargeback risk. The chargeback ratio determines the acceptable amount of chargebacks for any given merchant and is usually 1% or less. The chargeback ratio is determined by dividing the total amount charged back by the total volume processed for the month. If your account has been closed due to excessive chargebacks your options are very limited.
- Determine the reason for the excessive chargebacks and write a detailed plan on how you will reduce them.
- Show visible proof that you are implementing the items listed in your detailed plan to reduce chargebacks. i.e. updating your website with clear terms and conditions, adding your customer service number as the descriptor on the customer bill etc.
- Ask your current provider what steps you can take to reinstate the account.
- Identify other providers that are willing to accept the account.
- Begin to research an off shore account.
Merchant account closure can result in substantial losses for the business if you are not able to offer the convenience of credit card payment to your customers. It is always a good idea to give your merchant account the same attention you would any other business asset.