Cardholder Concentration and Other Risk Holds

Have you ever run a customer’s credit card multiple times in the same day? There are legitimate reasons for doing this that range from a customer making multiple purchases in a single day to paying off several invoices with individual transactions on the same credit card. Beware that this practice can cause funding for those transactions to be delayed due to assumed fraud risk. This type of fraud risk is known as “Cardholder Concentration”. Considering that credit card fraudsters typically attempt to use a stolen card once to see if it works and then use it repeatedly until it no longer works, you can understand why multiple transactions in a single day might be flagged.

The delay isn’t the worst thing that can happen as a result of Cardholder Concentration. Your merchant account can be placed under a microscope as a result. This includes asking to provide your last three bank statements, last two tax returns, last two years of financial statements and a review of the last six months of credit card processing transactions. Even though you may have done nothing ethically wrong, running the same credit card over and over in a single day will draw attention that you may not want.

Risk Holds are implemented when you have a very large transaction or a questionable transaction. Bundling a bunch of invoices into a single transaction can avoid drawing attention to your merchant account and being flagged for review. However, a large transaction may cause you to exceed your maximum transaction amount. If you plan to run a single transaction larger than what is normal for your business, call your Chosen Payments Account Executive before processing the transaction so we can advise the funding bank. Risk Holds are implemented by the funding bank and not your processor. Your credit card processor has no control over this but may be able to help get the money released sooner by acting on your behalf.

Risk Holds are fairly routine for new merchants in their first few weeks of processing. A Risk Hold may delay settlement payments for as long as a week but most likely about 72 hours. When you opened your merchant account, you completed an application that included questions about your average transaction amount and what your highest possible transaction amount might be. Think of this as establishing a line of credit for your business. Because a cardholder has six months to dispute a charge, you must always have the funds in your bank to pay back any disputed charge that you lose. However, the bank is only reviewing your merchant account if you cause red flags by exceeding limits or conducting transactions that appear abnormal.

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