Credit Card Processing – Next-Day Deposit and the Problem with Holds

Cash flow is arguably the most important metric in determining the financial health of any business. Access to liquid cash ensures that merchants can meet all of their ongoing expenses like payroll and interest payments, and keeps things running when unexpected expenditures inevitably arise. But cash itself is all but outdated, and with the world moving towards a cashless and contactless economy, businesses no longer take in large amounts of cash on a daily basis. The best solution to meet the needs of your business is next-day deposit. 

With card payments now the dominant form of transaction, credit card processing plays a huge part in determining a company’s liquidity, and merchants that don’t choose their processing partners carefully could find their access to cash slowed by one of the processing industry’s most common inconveniences — the standard hold. Finding a partner that offers next-day deposit will help your business manage cash flow and avoid the risks that come with standard holds. 

Credit Card Processing – Standard Holds

Effectively all payment processors make a standard practice of placing some kind of hold on transaction deposits. Those holds provide a safety buffer for the processor in the event of fraud, ensuring that the processor won’t be left on the hook for refunding money that’s already long gone. In most cases, standard holds last for two to three business days, but in unique situations or where extremely high risk is present, funding can be delayed even longer. 

While some businesses can tolerate a hold ranging from two business days to a week, for others — especially when cash strapped or facing emergencies — those holds can represent a significant source of stress.

Credit Card Processing – Next-Day Deposit

Payment processors understand that holds are an annoyance at best and a potential business risk for their merchants at worst and, as a result, some processors choose to eat the risk themselves by offering established merchants next-day funding. 

With next-day funding, deposits hit a merchant’s bank account the business day after they’re batched, assuming the batch is submitted prior to the processor’s stated cutoff time.

Next-day funding ensures faster access to cash and improved liquidity — major factors in the health and success of all businesses. The value of next-day deposits is even more significant for merchants that do heavy business on weekends. For example, an entertainment venue that does the bulk of its business on Friday night would potentially not have access to that revenue for five to six calendar days under standard funding terms. 

Standard Deposit Example: A merchant submits a batch at 3 pm on Tuesday. The funds are subject to a two-business-day hold and arrive in the merchant’s account Friday morning.

Next-Day Deposit Example: A merchant submits a batch prior to their processor’s 7 pm cutoff time on Tuesday. The funds are available in the merchant’s account Wednesday morning. 

Accessing Next-Day Deposit

Because waving the standard hold represents an increase in risk for the processor, it isn’t necessarily available to all merchants. Certain conditions, like a lack of business history or trouble with chargebacks, may exclude certain merchants from next-day deposit eligibility, so the first step in accessing it is to build a long history of healthy operations and good service. 

Beyond doing business right, the most obvious factor in accessing next-day funding is choosing a processing partner that actually offers it. Merchants evaluating payment processors should pay careful attention to deposit terms, since not all processors have the capability to absorb the risk next-day deposits represent, and the ones that do offer it don’t all have the same cutoff times. 

BAMS, for instance, offers merchants next-day funding with a 9 pm cutoff time — one of the latest in the industry. Transactions processed before 9 pm will hit a merchant’s bank account by 7 am the following business day — as little as 10 hours later. 

To find out more about how a BAMS merchant account can help your business access funds faster and save money on your monthly statements, click here to start your free custom five-point price comparison today!