What is a Risk Hold?
Have you ever had your credit card deposit placed on Risk Hold? We understand the frustration you feel when this happens. A Risk Hold is common for new merchants and can also be used when you have a very large transaction or a questionable transaction. 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.
A risk hold is a fairly a routine procedure that many merchants experience in their first few weeks of processing. It can create fear and uncertainty but you will almost always receive your money sooner or later. A Risk Hold may hold up your settlement payments for as long as a week but more likely about 72 hours.
Risk Holds are put in place to ensure the transactions are not fraudulent and are really set up to protect you as well as your customers. When you sign up for a new merchant account, you complete an application that includes questions about what your average transaction amount will be as well as what your highest possible transaction amount might be. Think of this as establishing a line of credit for you. That might seem ridiculous since you are merely accepting the payments. But, remember that a cardholder has six month to dispute a charge. If you processed a credit card for $25,000, the bank must be able to take back $25,000 from you at any given moment that a chargeback is made against your business. You must have access to that $25,000 at all times to pay back it back if needed.
Your merchant account is approved by an underwriter for a specific amount of money per transaction based on your business type, previous processing history, and transaction amounts. If you process a sale that is outside of your approved limit, the underwriters will issue a Risk Hold. This means the funds from that transaction may be held until proper documentation can be provided for the sale. Once the sale is confirmed with your customer and as long as their credit card is in good standing and this is proven to be a one-time transaction, the funds are released.
In some cases, your merchant services provider may be able to expedite this amount by calling the funding bank and discussing the details of your transaction. In some rare cases with exceptional circumstances, Chosen Payments may choose to guarantee to the bank to cover any loss they might incur in the future from a particular transaction. This will release your money immediately. We consider these situations on a case-by-case basis.