23 July 2009

4 Implications of Volume Caps in a Merchant Account

Volume caps in a merchant account could mean the following: limit of sales, limit Web site expansion, decrease income, and less fraudulent payments.

Volume cap is the amount of  financing that is exempted from being taxed. And, it is intended for some  types of businesses such as private entities or developers in a calendar year. So, a volume cap in a merchant account could mean the following:

Limit the Web sites sales

Since the merchant account provider only accepts a certain number of transactions, other clients cannot purchase your products and services. There is limited slots for purchases. So when you look for a merchant account go for those package without volume caps. Those kind of package would be very helpful for online businesses. The reason why some merchant account providers have volume caps is that they consider a lot of chargebacks which can happen due to fraudulent payments.

Limit website expansion

As the sales are limited, the website cannot be promoted fully. This happens when a consumer cannot make a purchase. This consumer would then browse through other websites because of lack of accessibility and convenience. The website will not be able to expand and make it through their target sales as consumer transactions are limited.

Decrease income

There may be some clients who may want to purchase your product or service but cannot do so because of the volume cap. Plus, the chargebacks for those fraudulent payments. This would mean less money is wired to you.

Less fraudulent payments

When transactions are limited so are the chargebacks. When a bank encounters a fraudulent payment, they automatically retrieve the money from your account. This is because online businesses are required to have a CNP or Cardholder Not Present account. Also, fraud is not likely to occur to small volume sales because only limited number of consumers are allowed to make purchases. This is one good thing about volume caps, however, the disadvantages outweigh the benefits.

What I think about volume caps is that it is either a benefit to your business or not. For me, it depends on what kind of business and your number of target sales. Whatever mission and goals you may have for your business, be sure to weigh risks and benefits.

No comments:

Post a Comment