Merchant Account Soft Limits – Explained
When a business applies for a merchant account the application will ask for three financial figures that represent the credit card processing amounts requested by the business. These three figures are:
- The average ticket or sale amount
- The high ticket or sale amount
- Monthly credit card sales volume
These figures help the credit card processor compile a risk profile for the business and ultimately drives weather the business is approved or not. A risk profile is considered based on the fact that the funds received from the end customer are deposited directly into the business bank account. The credit card processor assumes that the products or services purchased will be delivered. If they are not and the business disappears, the processor is responsible for refunding the customers money.
The sales figures requested on the merchant account application are weighted against the businesses financial strength to determine acceptance. If the business and owners are financially capable of supporting the requested amounts the application is approved.
Once approved these figures represent the soft limits for the account. The term “soft limit” is used because the account will allow these limits to be exceeded, however, the credit card processor reserves the right to hold funds that exceed the soft limits amounts on the account. Therefore it is important to understand your account limits and to stay within them.
The best thing to do is be proactive. If you know you are going to exceed your high ticket amount or your monthly volume, call your processor ahead of time and explain the situation. By being proactive you are demonstrating good management of the account and most processors will work with you and will not hold your funds.