One of the biggest benefits of processing credit cards with Chosen Payments is our ability to provide Next Day Funding. We understand your frustration when you close a batch at the end of the day and expect the funds to be in your account in the morning and they’re not. In a world filled with increasing fraud, we are seeing more merchants have funds held or delayed and taking to social media to express displeasure. Let’s break down some of the reasons that funds are delayed, who makes that decision and how you can avoid unexpected payment delays.
Who Holds the Money
It is important to note that your credit card processor is generally not the one who makes the decision to hold your money. That decision is made by the “funding bank” that advances money on behalf of your customer’s credit card issuing bank. As an example – if your customer pays with a Wells Fargo Visa, a funding bank such as First Data advances the funds to you overnight on behalf of Wells Fargo. First Data then contacts Wells Fargo to ask for reimbursement of the payment made on their behalf. In this example, First Data is assuming all the financial risk. Their Risk Department would be the one that delays your funds.
The Bank Risk
The money is advanced to you in good faith that the credit card is in good standing, the transaction isn’t a fraudulent once and everything is legitimate. The bank is at risk if anything goes wrong with the transaction, such as a chargeback. If your customer initiates a chargeback, the bank must be able to recover the money from you immediately. Likewise, you have the ability to issue a credit to a credit card using your Merchant Account. If you issue a $10,000 credit, the bank needs to know that you have the $10,000 on hand since credits are posted in real-time.
Why Funds Are Delayed
Funds can be delayed for many different reasons. The most common delay occurs when a merchant completes a transaction that far exceeds their average transaction amount. As an example, if most of your transactions are about $500 and you run a single transaction for $10,000, along with your other daily business, it is likely that the batch will be delayed while the $10,000 transaction is verified. This means First Data will contact Wells Fargo who then will reach out to the mutual customer to make sure the $10,000 transaction is legitimate. Likewise, if you have a high transaction limit of $5000 and you complete a $7500 transaction, this batch will likely be held for a credit review of your business. The bank needs to make sure that you will have the $7500 to pay them back if the cardholder initiates a chargeback for any reason. The cardholder has 90 days to dispute the charge and you must be financially solvent to return the money from all transactions in the past 90 days. This is why the bank will sometimes ask for the last six months of bank statements and/or a financial statement.
How We Can Help
As your Merchant Services Provider, we represent you. We can contact the funding bank on your behalf to share our knowledge of your company, you as a person and use our personal relationships with both of you to speed things along. At the very least, we can provide you with daily updates on the status of your delayed funds. In most cases, delayed funds are released within 72 hours. In some rare cases it can take up to 10 business days. As soon as you notice that you are missing a payment, please contact your Chosen Payments Account Executive for assistance.
How You Can Help
If you are performing a transaction that is out of the ordinary for your business, call us to discuss the transaction before you complete it. We may ask for a copy of the sales contract or other supporting documentation that will help avoid any delays by providing details to the Risk Department in a timely manner. We recommend that those one-off transactions be processed in a separate batch so that your normal daily transactions are not delayed because of the abnormal transaction