Preparation is the key to success, and any business owner worth their salt knows this. More importantly, it also allows one to mitigate damages before they can happen.
Jed Morley, founder and CEO of Platinum Payment Systems (PlatPay), recently covered the importance of backup processes in an interview about how to stay afloat during times of turbulence in the economy. In this interview, he warns business owners to not “fall into the trap of complacency” when it comes to ensuring the integrity of their merchant account.
Merchant Accounts are bank accounts that allow businesses to accept and process payments. And, losing the ability to do as such is detrimental to the continued success of any business. What are the risks? And what can you do to circumvent them? Learn more below:
The Importance of Backup Merchant Accounts
No business can afford to risk the loss of their ability to process electronic payments — this is true whether they’re running an online retail store or a standard brick-and-mortar store.
If the worst should happen, and your merchant account fails, you run the risk of the following:
- Loss of Sales or Profit: Temporary or otherwise, suddenly losing the ability to accept electronic payments will disrupt your business (no matter what product or service you sell). As a result, you are liable to lose out on the potential sales and profits for that duration — and perhaps, even beyond that.
- Loss of Business: Even if you do get your processing working again, for as long as you lose the ability to cater to your customer’s expectations, you run the risk of losing out on their business for the future — perhaps even potentially turning them towards your competition.
Having a backup system in place gives you a way to bypass either of these issues. Allowing you to potentially skate by without your customers ever even realizing that there was an issue!
Why Your Merchant Account May Get Terminated
Unfortunately, there are many reasons why a bank may terminate your merchant account — most of which come unexpectedly and are out of your control. They don’t account for ‘the state of the economy’ either, a bank can just decide they no longer want a certain business type, if that’s what it takes to manage their overall portfolio… so the risk is ALWAYS there.
As an extra note, there are also times (especially in the case of high-risk merchant accounts), where a merchant account may be terminated by the payment processor that issued them.
Here are just some of the reasons why your bank or processor may terminate your account:
- Excessive chargebacks: A chargeback, a charge that is returned to the buyer after a successful dispute, is one of the most common reasons why merchant accounts are terminated — especially if there is an excessive number of chargebacks on an account.
- Low funds: If your account does not have enough funds to cover credit card transaction fees, the bank will slowly begin to question the durability of your business. And, if it happens enough times, they reserve the right to terminate your account.
- Low processing volume: Similar to the previous, if your business shows perpetually low processing volumes, and is not able to match the minimum amount of credit card transactions, they reserve the right to take your merchant account.
Whatever the reason, termination can come at any time and with little to no warning. And, regrettably, when you get to this stage, most banks and lenders are more likely to reject your application for a new merchant account, as the termination places you even higher in the ‘risk’ category.
The Bottom Line: Why You NEED a Backup Merchant Account
And so, we get to the bottom line, which is, if you want to prevent unforeseen loss of sales and credibility because of a hold or termination on your merchant account, you need to be prepared. Jed Morley, the CEO of a high-risk merchant processing company, Platinum Payment Systems, said it best: “Don’t fall into the trap of complacency.” Because…
“In today’s economy, fraud is rampant, and there are hackers everywhere looking to steal your data, your identity, and your good reputation. Just because you’re covered now doesn’t mean that you always will be.”
So, just remember, even if you are running your business legally and legitimately, there is always a risk for you being shut down by the banks, or, even, your processor. And, if you wait until you’re forced to seek a new merchant account, it will already be much too late to prevent the losses that you should have never been.
It’s not like it’s difficult to sign up for a backup account either! There are processors like Platinum Payment Systems that would be more than happy to receive your call and talk to you about your account and what you can do to safeguard your interests from then on. You just have to take that first step and reach out to them.