All merchants need to indicate their anticipated monthly credit card processing volume, average and highest ticket amounts on an application, and process within these limits. It's always best to overestimate these figures because if you exceed the highest ticket amount, for example, the transaction will red flag and the processor will hold funds until the authenticity of the transaction is confirmed. The processor will also ensure that you have ample funds in the bank account to cover a possible chargeback or dispute.
If you've underestimated the monthly, average, and/or highest ticket amounts, then you can request a merchant limit increase. Requesting such an increase may or may not be granted so it's important to know the criteria that the risk and underwriting departments will use when making their determination.
The following variables are taken into account when the processor decides whether to grant a merchant limit increase:
- Your bank reserve - Merchant account providers are incessantly worried about possible customer disputes and whether the merchant will have enough funds in the account to cover a possible chargeback. The higher the credit card processing volumes that are allowed, the greater the risk the provider is taking. Consequently, the processor wants to see a healthy fund balance -- not just looking at the end of the month, but throughout the month. Moreover, the processor is not just going to ask to look at one month but several to glean a better idea about fund balances.
- Your credit score - Business folks with good to excellent credit are more likely to meet their financial obligations, particularly important if several chargebacks arise at a later time.
- Processing history - The processor will examine the transactions that have already taken place, focusing attention on the number of chargebacks and returns. A clean history bodes well for the powers that be to grant a merchant limit increase.
- Recurring billling - If you're a merchant who performs some automated, recurring billing, there is more likelihood that a greater number of chargebacks will surface. As a result, it's a little easier for merchants who do not engage in recurring billing to obtain a merchant limit increase than their merchant counterparts who do.
- Nature of business - Certain businesses (particularly some online businesses) may be thought of as more high risk. Processors may only feel comfortable granting a certain volume, average, and high ticket to such retailers.
- Reasons for requested increase - The processor will want to know why you're asking for a merchant limit increase. Specifically, they need to know if your method of operations has changed, if your product line is different, etc.. Once they know the particulars, they may feel more (or less) inclined to granting any volume increase.
In summary, ask for a higher volume, average ticket, and highest ticket (within reason) during the application process. But eventually -- particularly as your business grows -- you may need to expand these amounts so it makes sense to become familiar with merchant limit increase criteria.
