By Libby James – Co-founder of www.merchantadviceservice.co.uk a non-biased and free of charge advice platform helping business owners navigate the complexity of merchant services by providing educational content. Libby speaks about the problem of being served notice by merchant banks and how to overcome termination.

What is a Terminated merchant account?

Merchant banks, known as acquirers, and providers sometimes serve notice to businesses processing with them. The notice period tends to be at least a month, unless terms and conditions have been broken where occasionally immediate termination will take place. Sadly, for the merchant, it can mean having to find an alternative provider in a hurry.

Why would banks serve notice to profitable businesses?

When notice is received from a bank it can often leave the merchant wondering why. There can be a few reasons for termination…

• Excessive Chargebacks – chargebacks are where the customer disputes a transaction, therefore the bank refunds them, leaving the merchant to re-coup the funds by proving the card payment was genuine. Chargebacks tend to be common in higher risk industries and therefore the banks monitor chargeback rates very closely.
• Breeched Terms and Conditions – applications are approved by underwriting prior to the merchant account going live, but if the merchant then offers products or terms outside of the ones originally approved then the banks may decide to terminate.
• Bank Risk Portfolio – the banks have a responsibility to keep their risk portfolio balanced, meaning that if they have too many merchants operating in the same industry or too many high-risk businesses transacting then the banks will terminate.

What to do if you’ve had your merchant account terminated

When you receive notice from your existing provider, it’s important to act quickly. Finding alternative card payments providers can be complex, however it isn’t impossible. Working with a non-biased Merchant Service Broker can assist businesses in finding suitable alternatives. The reason for this is that a knowledgeable Broker will understand the criteria of a range of banks, ensuring any applications made have the biggest chance of being accepted.

Remember that each bank will have varying criteria and terms and conditions, meaning if you have been declined by one or served notice – it doesn’t mean that you’ll be refused card processing by all banks. In these circumstances it might be beneficial to use a bank who manually underwrites applications, as they can be more flexible and review applications on a case by case basis.

How much does it cost to find alternative processing after termination?

Merchants wrongly believe that if they have been terminated by their existing provider, they will be forced to pay eye watering rates and charges elsewhere. Providing the business has a solid trading history and acceptable chargeback levels, rates shouldn’t differ too much to previous charges.

It’s important to remember to compare account costings on a pound for pound basis rather than the headline rate alone. Hidden costs can mount up over a contract length of years, meaning it’s vital to account for even the smallest of charges.

Way’s to prevent being terminated by your merchant account provider

If you operate in a high-risk industry such as travel, furniture retail, computing or gaming it’s wise to take preventative measures to ensure (as much as you can) that your account will not be terminated. The first step is to reduce the potential for chargebacks where possible, this can be managed by a third party or internally if you prefer. If you are changing the company set up or products sold, make sure you run this by your provider before ‘going live’ giving you the option to switch providers if you then fall outside of your existing banks criteria.

Multi-merchant accounts to prevent termination

Higher risk and large turnover e-commerce businesses may choose to have more than one merchant account, meaning that if you do get terminated, they have an instant ‘back-up’ option. Multi-merchant accounts work together, each taking a percentage of total transactions. In an e-commerce set up the customer experience remains identical; however, the transactions may be handled by two separate banks via the same payment gateway. If notice were to be received by one of the banks, the chances of being unable to accept card payments is reduced dramatically. The reason for this is each individual bank will have different criteria, making the likelihood of being terminated by both banks at once very slim.

Terminations – don’t panic!

As a business owner your heart can sink when being terminated by your merchant account provider. However, these circumstances are more common than you think – don’t panic. Speak to a non-biased and experienced Broker who will help you to secure alternative solutions.