When you signed up for your merchant account you specified your average transaction amount, your high transaction amount and your estimated monthly sales volume. These values were used during the underwriting phase of your account acceptance and represent the soft limits for your account. Most processors won’t have a problem if you exceed any one of these by a nominal amount. On the other hand if you exceed any one of them by an excessive amount you are raising a red flag with your processor.
Now should you run a $50,000 transaction with your merchant account? The question would be – did you specify a high ticket amount of $50,000 or more when you completed your application? Typically when a new merchant account is set up the business owner will estimate what they think the volume, average ticket and high ticket will be. It is always a good idea to exaggerate the values to approx double, ever triple the expected amount. This is a good practice to allow for expected growth of the business.
With regard to our $50,000 transaction, if your normal transaction size is $30,000 and your high ticket amount is $45,000 then you will likely have little problem with an amount slightly above at $50,000. Now if your average transaction is $35 and you high ticket amount is $500, then running a $50,000 transaction is a very bad idea. This transaction represents a great deal of risk for a business that is averaging $35 per transaction, both for the business and the processor.
Why is that a risk?
The risk of the transaction lies in the likelihood of fraud or a chargeback. This risk is substantial to your processor because if you commit fraud or have a large number of chargebacks with the inability to pay for them then the processor is stuck with the bill. Situations like these are handled differently with each processor. Some have automated systems that will flag a transaction if its outside the specified boundaries. Others have actual humans that review each account. Some processors allow for the business to exceed their limits temporarily while others will permanently shut down the account if the limits are exceeded. Regardless of the rules with your specific processor you are pretty much guaranteed to have your batch reviewed if it exceeded your specified monthly volume limit.
Most credit card processor’s risk departments have very specific operational guidelines they adhere to. It is very important to know that they have complete control over the money that flows though the account they have underwritten. That being said, if your account breaks the rules the consequences can be severe. Some will shut down your account and never release any funds that are in excess of the guidelines approved for your account. Some will hold the funds for extended periods of time. Others won’t tell you the funds have been held and will wait for you to call in. Once your account or funds are transferred to the risk department within your processor it can be a very long, frustrating and cumbersome process to correct.
What should you do if you absolutely have to run a larger transaction?
I always suggest you be proactive. Call you processor and tell them what you would like to do. They may approve the transaction on the spot. They may want a signed invoice authorizing the charge from you customer. They may want to see recent bank account balances for the business. The point is that if you call ahead and seek approval first you are likely to avoid a great deal of headache later.
To sum it up:
Always try to get approved for the maximum amount possible when opening your account and secondly always ask before you attempt to exceed the approved limits on your account.