Recently, I spoke with a colleague in the merchant account field who told me about the woes that one of his clients experienced.  Apparently, the merchant swipes credit cards but, for months, did not realize that thousands of dollars had not been deposited into his bank account.  Upon making this discovery, the merchant called him, inquiring about the missing funds.  "I don't see one batch that has been deposited for the last six months," the merchant lamented.

The merchant's mood soured further when he found out that, indeed, no batches were settled (i.e., no funds were transferred into his bank account) and that all the customers' credit card information was no longer stored in the credit card terminal.

My friend told the merchant that while such credit card data could be unearthed, he would be ill-advised to put those transactions through.  Indeed, many of the merchant's customers would no longer recognize the charges and, as a result, dispute them.  A high threshold of new chargebacks could lead to other problems for the merchant, such as the possibility of losing his merchant account and even being placed on a Terminated Merchant File (TMF) list.

The merchant's concern about the lost batch amounts turned to anger when he barked at my friend: "You should have told me that my system was not batching out."  My friend explained to the merchant that he never requested auto mode where the funds automatically batch out from the terminal for settlement.  Moreover, my friend relayed that even if the system was set up to automatically batch, any technical glitch could occur, and it's still the merchant's ongoing responsibility to ensure that the funds reach his bank account.  "If you had brought this to my attention much sooner," my friend expounded, "I would have been able to resolve this issue."

The merchant has no legal recourse as well.  He signed a contract explicitly stating that merchants must batch out the funds every day or face the following possible consequences: higher processing rates, delay in payment, and/or, as in this case, the inability to collect funds.  In addition, all merchants need to notify the processor in an expedient manner when batch amounts are missing in action.

The moral of the story is that it is vital to batch out transactions on a daily basis (of course, only applicable on the days that you have at least one transaction) and then ensure timely deposits of those batches.  Please do not wait any stretch of time (certainly do not allow six months to elapse) before you ask about any given batch capture / batch settlement issue.  Remember this topic with a series of two words: batch out ... settle funds ... be happy.  

There may be a variety of reasons merchants decide to close their merchant account: A seemingly better offer from another provider became too enticing; the present provider's fees began to escalate out of control; the present mode of accepting credit cards may not be convenient or prove too burdensome or problematic; the business may not truly warrant credit card processing capability; and/or the business may be sold or closed

Regardless of the reason, there are certain common points that all merchants should consider when closing their merchant account, outlined below:

1. It's best to give at least 30 days notice when closing an account, and many contracts demand it.  However, your processor may decide to quickly accommodate your request to close the account without any time stipulation or penalty.

2. Before you close the merchant account, ensure that you have no pending batches.  You want all your funds to be able to get to their rightful destination -- your bank account.  

3. It's advisable to express your interest to close the account in writing.  Typically, you can write a letter to the company, referencing your business's name and merchant account number, requesting to terminate your merchant account, and subsequently signing the document.  Almost all providers can send you a standard cancellation form where you can just sign and return it.

4. Of course, ensure that your soon-to-be ex-processor receives it.  Do not assume that if you fax the letter or form, the processor  received it.  Always check to make sure that the information was received on the other end, and it's prudent to get receipt confirmation in writing.

5. Business folks who should not incur any cancellation or termination fee should underscore this point, and make certain that the processor acknowledges that no such charge will be assessed.  Merchants who, by contract, must pay a cancellation or termination fee, should find out the amount and make certain that there are ample funds in their bank account to cover this expense.

6. You must keep your account open and accessible to the processor as you are still liable for any outstanding balance owed on the account.  Even if your owe nothing to the processor, you must still have an accessible bank account should any future chargebacks arise.  This protects you as well as the processor.  You don't want to receive a collection notice, indicating that you owe funds from a chargeback that occurred after you closed your old merchant account and bank account.  (Typically, you'll be asked to keep your account open from at least 6 months to 3 years.)

7. You will still receive a statement the following month from the old processor.  For example, if you closed your account the first week of August, you should anticipate receiving a statement in September, reflecting your August transactions.  You should not receive any statement in subsequent months.

By knowing and following the principles outlined above, the merchant account closure process should be much smoother and easier.  It should eliminate any typical problems associated with closing a merchant account.