How to Keep A Merchant Account in Good Standing

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Merchant account’s opens a business up to a wide range of payment methods. You can make shopping easier and more convenient for your customers as well as expand your reach by welcoming all cards. However, keeping your merchant account in good standing is extremely important to ensure smooth business operations and customer service.

What is a Merchant Account?

An merchant account is basically a specialty account provided by a merchant processing service or institution that allows businesses to accept real-time credit card transactions via a shopping cart on a website. Webmasters need an eCommerce merchant account to facilitate the transaction in order to accept your customers online payment.

What Can Cause a Merchant Account to Be Shut Down?

A merchant account is shut down due to any of the following reasons:

Suspicious Merchant Activity

Merchants could breach the merchant processing agreement terms in a number of ways. This might include maintaining multiple merchant accounts, depositing transactions on behalf of another merchant, etc.

Merchant Fraud

The merchant processing service will understandably shut the merchant account down if a merchant is committing fraud. Some common examples of fraud include using misleading advertising, not delivering merchandise, overcharging customers, making fraudulent transactions, and misusing credit card information. Keep in mind that you are personally guaranteeing your merchant account and legally liable for all chargebacks incurred on your account.

Excessive Chargebacks

Forced credit card refunds or chargebacks are one of the primary causes of terminated processing agreements. Once a merchant exceeds a pre-determined chargeback threshold, the merchant account will be placed on hold and possibly be closed permanently for excessive chargebacks.

Too Many Refunds

Excessive refunds is a “Red Flag” that a company is not satisfying their customers and can raise questions into your business model. Your merchant account can also be shut down if your refund ratio is too high. It is recommended that you keep your dispute ratio under 1% and provide a dynamite customer experience.

High Risk Merchants Misrepresenting Their Business

Merchant who misrepresent their business type to get an account approved, is another cause for termination. This practice is fraudulent and easily uncovered by a credit card processor. Very dangerous, as you can be placed on a terminated merchant file and be barred from accepting cards in the future.

How to Keep Your Merchant Account in Good Standing?

Following are some of the best practices to make sure that your merchant account remains in good standing:

Test Your MID Descriptor

A descriptor is basically how the transaction will appear on the credit card statement of the customer. It is recommended that you make sure that it is correct and accurately describes your service/product to help your customers easily identify the charge. You also want to make sure that your receipt to the customer matches the descriptor so that there is no confusion and the chances of the customer initiating a chargeback are low.

Test Your Account Functionality

It is recommended that you run a few test transactions on your merchant account to make sure that everything is working properly e.g. making sure that the refunds are being issued without problems.

Easy to Reach Customer Service

Before using the MID, you should make sure that your customer service is easy to reach. Banks and other financial institutions often run audits and test the customer service of businesses to make sure that their call center is functioning properly. You want to make sure that your hold times are as short as possible. The longer your customer has to wait to talk to your customer service, the more likely they are to dispute the charge.

Keep Processing Consistent

Run consistent transactions and consistent volume every month. It is important because banks don’t like to see huge spikes in volume. Not to mention it helps keep a stable chargeback ratio. Contact your merchant service provider ahead of time to request an increase, before exceeding your monthly volume.

Use Your MID for Approved Products

You should only use your MID for the URL and products that the bank has approved you for. You also want to make sure that the price points you run on your merchant account are the same that are displayed on your website. You run the risk of having your MID closed if the bank catches you using it for a different product or URL.

Prevent Disputes Before They Happen

If you want to keep your dispute ratio low, then it is highly recommended that you prevent invalid disputes from ever being filed via Real-time Resolution (RTR). RTR allows you to communicate with your customers, provide product and order information, all in real-time. The increased transparency gives the financial institution of the cardholder sufficient data to prevent invalid disputes from being filed.

Monitor Your Bank Account Regularly

It is recommended that you monitor deposits into your bank account on regular basis to catch any deposit issues or mistakes. It is much easier to rectify such issues when they are fresh instead of stale and older. More importantly, monitor any chargebacks which were withdrawn from your account.

Stay On Top Of Customer Service

Your customer service team is your frontline in defending your merchant account from termination. Keeping customers happy and troubleshooting customer issues is the most important piece on building a business. If a customer cannot be satisfied, its always better to offer a refund, rather than the customer creating a chargeback.

Consider A Chargeback Alert Service

Chargeback alert services offer a merchant the opportunity to refund a customer, before the customer complaint becomes a chargeback. The chargeback alerts give you a short timeframe to return the transaction, before it gets recorded as a chargeback.

Chargeback alerts are a great way to reduce your chargeback ratio and prevent a termination of your account.

In Closing


These are some of the best practices to keep your merchant account in good standing. Following these practices is extremely important because if you don’t, you risk getting your MID closed and your money on hold for up to 180 days.