^{Risk Management - Merchant Services: How to Avoid Fund Holds}

For merchants, few things are more frustrating than delayed access to their hard-earned revenue. When a processor places a hold on your funds, it can disrupt operations, impact payroll, and create unnecessary tension between you and your payment provider. The good news? These issues are often preventable.

Effective risk management starts with awareness and continues with proactive best practices. Let's break down why funds get held — and what merchants can do to reduce risk and stay in the clear.

Why Are Merchant Funds Held?

Payment processors and banks are responsible for managing risk on every transaction. If something raises a red flag, they may temporarily hold funds to protect against potential losses. Common triggers include:

1.) Sudden spikes in volume or ticket size

2.) A high number of chargebacks or refunds

3.) Suspicious activity or inconsistent transaction patterns

4.) Selling high-risk products or services

5.) Incomplete or inaccurate business documentation

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Remember: Funds are typically held to protect all parties — not to punish the merchant. The key is understanding what the processor sees as risk and then managing your business accordingly.

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^{Best Practices to Avoid your funds being held:}

Here are proactive steps every merchant should follow:

1. Be Transparent from the Beginning

Disclose your business model clearly on your application. Don’t downplay your ticket size, average monthly volume, or product/service type. Surprises during processing are a red flag.

Tip: If you plan to scale quickly or launch a new product, let your processor or relationship manager know ahead of time. Your Agent and Relationship Managers are there to help your business succeed!

2. Maintain a Professional Online Presence

For eCommerce or service businesses, your website is often the first place underwriters and risk teams check.

Include full contact info, refund policy, terms & conditions, and clear product/service descriptions.

Avoid misleading language or promotional gimmicks that imply unrealistic results.

3. Keep Chargebacks Low

A high chargeback ratio signals customer dissatisfaction or possible fraud. To prevent them:

Use clear billing descriptors.

Communicate delivery times and policies.

Respond promptly to disputes and refund requests.

Use fraud tools like CVV, AVS, and 3D Secure.

4. Monitor Processing Volume

Avoid dramatic jumps in daily or monthly volume, especially if they exceed what was stated on your original application.

Solution: If you anticipate growth (a holiday sale, new campaign, or client spike), contact your provider to review and potentially adjust your volume limits.

5. Submit Complete, Accurate Documentation

Underwriters often request verification if something seems off. Having the following ready will help:

Valid government-issued ID.

Voided check or bank letter.

Processing history.

Business license (if applicable) and SSN# / Fed Tax ID#

Being responsive and organized helps resolve issues quickly.

6. Work with a Payment Partner That Communicates

A trusted processor or ISO will help monitor risk, update thresholds, and flag potential problems before they escalate.

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At SoftTouch POS & Payments, our Relationship Managers are here to advocate on your behalf and help prevent fund holds before they happen.

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The best way to avoid having your funds held is to run your business with transparency, consistency, and communication. Risk isn’t eliminated — but it can be managed.

By following these practices and working with the right partners, merchants can process payments with confidence and get paid without delay.

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