Avoid Funding Holds with Square

How to Avoid Funding Holds with Square

A blip in your payment processing flow can delay your business processes. These situations, such as withheld cash, a processing ability freeze, or account cancellation, can be inconvenient and disastrous. Square has taken over the payment processing market due to its simple setup and user-friendly interface. To provide its application process, the company forgoes traditional underwriting standards; thus, this ease comes at a price. A massive increase in merchant complaints about Square holding funds and abrupt account cancellations by Square’s fraud prevention staff has been brought on by this strategy. Square’s lack of the necessary customer support system to rapidly and efficiently address merchants’ issues worsens the problem. So, to maintain your cash flow and the stability of your company, you’ll need to find measures to avoid this from happening. 

How To Avoid Holds With Square

You must take action to stop Square from holding your account in the first place if you want to get your money on schedule and avoid dealing with Square’s customer care. 

  1. Recognize Square’s reserve guidelines

While Square’s legal policy is readily available on the company’s website, it takes some searching to find the most crucial details. Article 13 of the Square payment terms outline the company’s reserve guidelines. 

Square’s strategy of “reserve for holding funds.”

Following this policy, Square maintains the right to halt or postpone your reimbursements as it sees fit, at any time. Due to the extreme nature of this agreement, Square may, without prior notification, make any transfers or debits from the reserve or any bank accounts connected to any of your Square accounts to recoup the monies owed. Most complaints from Square merchants regarding holds on funds are related to a clause that is neither stated nor clearly described in the company’s standard advertising materials. 

Keyed (card-not-present) processing limits

Square imposed a processing charge on card-not-present (CNP) transactions until November 2013. The business would permit retailers to handle up to $2,000 in manually entered transactions for seven days. Also, funds would be held in reserve for thirty days if the merchant processed more than $2,000 before being returned. The lack of notice from Square when users approach their $2,000 cap causes users to go over this limit unknowingly. Additionally, Square says merchants can handle any transaction or amount without being concerned about a processing restriction because it has discontinued this limitation. But that doesn’t imply that the business has given up holding money. 

The ARA (algorithm rules all)

Due to the fact that no specific restriction is placed on the account, the present reserve policy functions with a higher level of unpredictability. The unadvertised algorithm risk concerns are now Square’s primary justification for holding back money. There have been multiple allegations of Square’s automated processes abruptly and permanently holding merchant payments without clearly indicating how to do so. Many business owners claim that holds are being put on completely legal stolen transactions. The most concerning aspect of Square’s service at the time is this policy. 

  1. Make sure that your business type is not restricted.

Some specific high-risk companies are prohibited from using Square’s service. However, Square’s straightforward sign-up procedure occasionally falls short of pre-screening these businesses. Then, until Square’s fraud prevention team finds that the merchant’s business type is prohibited, these merchants continue to process payments without restriction. At this point, Square often blocks its account. In the meantime, as they wait for Square’s customer support team to issue a final decision, the business owner is perplexed about what went wrong. 

Checking your form of business against the Square terms and conditions, which identify prohibited business types, will help you avoid this situation until Square establishes a stringent screening procedure. Consider hiring a high-risk business account specialist if your company is involved in one of the following sectors:

  • Direct marketing, subscription services, or offers
  • Telemarketers that call in or out
  • Payment of bills services
  • Agencies offering credit counseling or credit repair
  • Sales of infomercials
  • Services for wagering and gambling
  1. Expect unexpected increases in processing volume.

While great for a business’s owner, unexpected growth can also set off fraud prevention systems if it happens without Square being informed beforehand. Many Square complaints claim businesses may experience account holds if their transaction volume suddenly and substantially rises. Whether these are valid transactions, Square may translate a rapid spike in transactions as evidence that these payments are scams or are being contested by customers. Additionally, an unexpected rise in transactions could signify that a business is now operating outside of its declared field of expertise.

Square is the only party with the authority to make these evaluations and to voluntarily create a reserve of any size, as specified in its reserve policy. Therefore, if you foresee a sudden spike in transactions that diverge from your typical sales pattern, you are advised to inform Square via its help center.

  1. Keep an eye on your average ticket size.

Your processing volume and average ticket size may change independently, but significant changes in either can impact Square’s funding of your sales. The average ticket size for your business is the amount of a typical sale, which Square calculates as you build up your sales history. The fraud detection team at Square may notify you if your standard ticket size increases abruptly. 

It can be challenging to monitor because your average ticket size could change regardless of whether your processing volume rises or falls. For example, if you make twenty sales of $100 worth of merchandise over a typical week, your standard ticket size is $100. However, if you sell the same amount ($2,000) over a typical week through four transactions of $500 each, your ticket size will unexpectedly climb by a factor of 5. 

Square’s risk evaluation systems would probably identify this abrupt change in the sales amount as suspicious conduct. In general, big volume businesses aren’t advised to use Square as their business account provider, so let Square know if you expect a sudden spike in your ticket size. 

  1. Before processing large transactions, let Square know.

Occasionally, you might be informed in advance that you’ll process money more significant than your usual ticket history. In these circumstances, it is a great idea to get in touch with Square and let them know that a sizable transaction is about to occur. Notifying Square before surges related to a sizable one-time transaction or seasonal change is always preferable. 

By providing Square with this information, you’re helping them develop your processing account and comprehend the nature of a significant transaction. In general, Square may flag transactions exceeding $500, especially if you never charge more than $100. Before you start accepting payments, make sure to let Square know if your company frequently conducts high-ticket transactions. Also, remember that anything that significantly surpasses your regular ticket trend may result in a hold. 

  1. Prevent chargebacks 

A spike in chargebacks for merchants seems to be a significant contributor to account holds. To reduce the risk of fraud and help cover the expenses of chargebacks, Square frequently creates a reserve account. If Square expects future chargebacks, it may expand the reserve account or close your account.

Several procedures exist that can assist merchants in preventing chargebacks, including:

  • Stating any costs that apply
  • Ensuring that the rates advertised to the buyer and the amount charged correspond
  • Ensuring that the address and name of your company complement those that the client would see on their account statements
  • Delivering products and services on time
  • Facilitating the cancellation of any recurring payments for customers

Failure to adhere to these rules could confuse customers and result in a chargeback. Contesting chargebacks can be a time-consuming and expensive process. Therefore, if possible, merchants are actively encouraged to prevent chargebacks. 

Summary

Square can be a great platform for accepting payments. Its unconventional regulations, however, make it challenging for businesses to keep up. For instance, if the company decides it is necessary, it may halt or delay your payouts. Therefore, before taking payments through Square’s service, retailers should thoroughly understand its policies. Square has, however, revoked some of these regulations, including the card-not-present (CNP) processing limit, which was a significant contributor to fund holdings. You also have to consider what would cause Square to hold your account. You may prevent a protracted, expensive Square funds hold by keeping an eye on your chargebacks, sales volume, and ticket sizes.

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