Merchant account nightmares?

7 replies
Folks,

I am wondering how many others have experienced the nightmares of merchant account providers? My last experience made me give up and lose hope in e-commerce.

A few years ago while running a very successful online and offline business selling physical products, my merchant account service provider came in and swiped out about $60k from my checking account.

This had been going on for several months prior to this. The amounts would vary. It seemed that anytime we did any volume, they would come swipe it for themselves and hold it.

Some days, they would take $1,800, some days $8,500. With the constant cost of business, we needed every dollar to pay the bills and to pay ourselves. Suppliers, dropshippers, employee paychecks, etc, etc.

Needless to say, someone else coming in and taking money that didn't belong to them was infuriating. But why would a merchant provider do this? If you've been in business for a while you already know the answer. They did this because our sales were way above and beyond what we had signed up for. But our sales were this high because of promotions, holiday seasons, etc. Also just due to the fact that year
after year we had grown, like any business does. I honestly never knew we would be hitting those numbers or I would have told them this in the beginning.

Long story short, I told them that our monthly volumes would never exceed 50k. A few years into business I had a December one year hit over $270k. They freaked out understandably. I tried to explain it was because of the holidays and I sell games. They didn't care. They proceed to tell me they were holding my money for 180 days.

I had enough. I just gave up. I went out and got a job which I still work to this day. I still think it was one of the biggest mistakes of my life.
What I -should- have done initially is not under estimate anticipated volumes when they ask the question on the application to get the account. Since it was too late to go back in time, what I -could-have done is warned them that Christmas season is coming and we are more present on the web than ever and have tons of advertising in place so expect a very busy season and a high volume of cards from our website.

The take away from all of this for me personally is to take more time in the planning phases of business. I dread the thought of doing it all over again, and not even sure if I will. It has crossed my mind a few times and last year I started an LLC but haven't done a damn thing with it.

Looking back, I do miss my freedom, but I don't miss the stress. I have a good job that pays in the six figures + good benefits, so I should be happy. The problem is the job requires me to be out of town
for weeks at a time.


Cheers,
Kent


P.S. If (with a big capital "I") I ever get back into the biz, I will be much more selective with merchant providers, and I will totally exagerate on the high end when they ask me about my monthly anticipated volumes. Just to error in the side of safety.
#account #internet markeing #merchant #merchant account #merchant accounts #nightmares
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  • Profile picture of the author Mike Anthony
    The answer to that is programmatic (at least for the online part). You can have more than one processing service (merchants accounts, services like Stripe etc) and even switch them automatically based on sales volume in a hour, day or a week. Less total volume coming through each lowering each company's risk alarms and one company's decision doesn't lock up all the cash

    If you still can and it was overall profitable you should jump back in but with the right tech setup.
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  • Profile picture of the author tyronne78
    I've heard so many horror stories about online business owners using only one merchant account it's not even funny. NEVER rely on just one merchant account. You should have a backup merchant account with a merchant account to back that one up. Luckily I've never had funds held for 6 months or more. I just learn from other people's mistakes.

    By the way,good luck with the job.
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  • Profile picture of the author metromaleclinic
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  • Profile picture of the author Randall Magwood
    I've had bad experiences myself. But with Amazon and Google Checkout. You are obviously an intelligent person since you're able to recoup and get back into a 6-figure job. Like others say, have multiple merchant accounts - the same way you would have multiple savings accounts at a bank. Try another business though. I'm confident that you could make it succeed.
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  • Profile picture of the author Kent Hopkins
    Tyrone,

    Yes, and in the end we actually had three merchant accounts! Looking back, it is utterly ridiculous but you're absolutely right, totally necessary. It is a bit frustrating even thinking of the lengths one must go to to protect yourself.

    Randall,

    I believe through your latest comment you have pushed me over the fence in my hesitation of starting again. I have debated for years. Many have told me the same thing. I am going to give it another shot. Thank you for your words of encouragement. I will keep you updated as to how things go. There are many things I am going to do differently this go around.
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    Doubts Kill More Dreams Than Failure Ever Will.
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  • Profile picture of the author dave_hermansen
    We've never run into this problem. When our volume starts increasing, we contact our merchant provider and get them to increase our volume size. Of course, we also have practically zero chargebacks on any of our sites. Generally speaking, they start holding money when history tells them they should.

    And, it's not like they are "stealing it". It's being held and released later. I realize this is not ideal when you have to manage incoming and outgoing payments but as others have said, having another merchant account might be the best solution if you cannot get the merchant account to work with you.
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  • Profile picture of the author Kent Hopkins
    Dave Hermansen,

    Yeah it's too bad and it does seem like that would be the case. Unfortunately there was more to it than simply being a protective measure. You see, we never had a lot of charge backs until they dipping into our accounts. With each dip, leaving us less and less liquid. the chargebacks naturally expanded, quarter by quarter. There have been many scam exposing websites talking about the company since then. I found one with hundreds of complaints. I guess they took advantage of a lot of people. My dad who is an expert in investing, seems to think the act of mass drafting of thousands of peoples accounts was a pump and dump scheme in guise as "consumer protection efforts" The perpetrators were the officers in the company have had past legal issues which I will not go into on this forum. I think this company has since been shut down or changed ownership/management.

    As of 2018 (January) their rating from a popular merchant account review website is "D" 2.5 points out of 5. Just looked it up, wow does not look like things are getting any better for them or their clients. Most ships like this usually sink themselves as the saying goes, you reap what you sow and when you do it on other people's money, karma can be a B
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  • Profile picture of the author dave_hermansen
    There are tons of merchant account providers. We really like Durango, have been using them for over a decade and have never run into problems such as yours. They actually answer the phone and are extremely helpful with every situation we have ever faced.

    Sometimes, the answer is as simple as switching to another company. Let them know about the poor experiences you have had with another company and ask how they would handle a similar scenario.
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    My PROVEN ecommerce process, as seen on: Fox Business News, the NY Times & Flippa
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