Understanding Transaction Limits in Merchant Accounts

Understanding Transaction Limits in Merchant Accounts

A holder of a merchant account has to pay two kinds of fees monthly: the recurring fixed fees and the transaction fees. As the term already implies, transaction fees are based on the number of transactions processed every month. What many do not realize is thatmerchant accounts have a volume limita limit that prohibits the merchant to process any more credit card transactions once it has been passed.

First off,merchant accounts have a minimum volume requirement. This requirement means that the business using the processing service should have processed credit card transactions up to a certain amount. The amount varies from bank to bank. If the merchant does not reach it, he is required to pay an additional fee, which is included in the monthly charges; however, this fee is very minimal.

The volume limit for maximum dollar volume inmerchant accounts has more repercussions. Every account can only process a certain amount of money from credit card transactions per month. Take note that the basis here is the amount involved, not the number of transactions. Once the merchant exceeds the limit, the bank will freeze the merchant's bank account until the following month.Needless to say, a merchant should consider this limit when shopping formerchant accounts.In any case, this begs the question: what is the purpose of the maximum cash volume limit?

Basically, it serves as a security for the financial institution that provides themerchant accounts. The bigger the amount processed, the higher the riskand the higher the chance the credit card processing company loses money. For instance, when a big chunk of this amount is disputed, the credit card provider will have to refund the money to the consumers. Naturally, the merchant should then pay back the card processing company for the refund, but in the event that the merchant does not have the ability to pay it back, the responsibility then falls to the underwriter of the acquirer. The processor has to pay the credit card association without getting anything in return.

Merchants should consult the providers of theirmerchant accounts during times when the sales are higher than usual for a temporary limit increase. This is necessary during November and December.

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