Internet companies and merchant account limits

If you run an internet business with the potential for rapid growth, and you use a merchant account for processing credit card transactions, please check your merchant account monthly limit before you encounter the problem that we experienced over the weekend.

Wikipedia has a decent article on Merchant Accounts, but until I edited it today it said nothing about monthly transaction limits.

The merchant account limit bit one of our Provo Labs companies this weekend. Here\’s what happened: started selling subscriptions to its web site on October 4th. We had some initial subscribers from blogs and news releases, but we didn\’t turn on our online marketing efforts until last Friday. Our first email campaign went out to 80,000 genealogists. We invited them to get 2 years access to our databases and online courses for the price of 1 year. Our expiration date on this offer is today, October 31st. ( has demonstrated how important it is to have special offers that include urgency.)

The email campaign brought us a large number of new subscribers. Our team had a contest to see who could guess how many subscribers we would get in the first 24 hours. I won the contest–my guess was within 4 of the actual number.

The large numbers of signups continued into Saturday, but then came to an almost complete stop. On Sunday, our numbers were tiny.

Upon investigation yesterday, our team discovered, much to our dismay, that we had reached our monthly transaction limit on our merchant account. Between Saturday and Sunday 113 credit cards were declined, costing us more than $5,000 in revenue.

Yesterday, when our bank helped us get the limit increased temporarily, we saw the subscription numbers soar once again. Hopefully, we can recover the lost revenue from the denied cards. But more importantly, we hope to get an increase to our limit so we won\’t have this problem again.

I remember many internet companies had problems with merchant account limits years ago. A 2002 story about profitable internet companies in Southern California describes the trouble that one internet startup had with their merchant account:

The toughest part, they agree, was establishing credit as a totally Internet business. The first weekend they received $10,000 in orders. \”Our merchant account (for payments by credit card) would take 12 days to clear our money,\” Livdahl says. \”Suppliers wouldn\’t ship because we hadn\’t paid. We just had to wait. It was terrible.\” sells a report that lists 500 retail ecommerce companies that had 2005 revenues of more than $3 million. Many of these companies are fast growing. I wonder how many of them have run into the merchant account limit problem at some point in their history? I bet this is a pretty common thing.

Does anyone have insights into this problem or first-hand experiences with it? What can be done to avoid it? (It\’s actually a nice problem to have, in comparison with other problems that many startups have, like not having enough customers.)


Interesting thing from Google Trends when you look at the cities where people are searching for \”merchant account\” or \”credit card processing.\” Apex, NC has far more queries than any other US city. Does anyone know why?

And Pakistan has far more searches on \”merchant account\” than any other country. Pakistan is listed by MSNBC as one of the top 5 countries involved in credit card fraud.

11 thoughts on “Internet companies and merchant account limits

  1. Paul,

    The problem you have described is very commom particularly among “card not present” accounts used for internet and telephone orders. I’ve seen it time and time again.

    Something else to be aware of when it comes to merchant accounts…they can shut you COMPLETELY OFF without any notice, and it may not be as easy as you found to re-start, or raise your limit.

    I always advise my clients to have more than one merchant account at all times, and use them both on an ongoing basis. That way, if you do get one shut off, you can just switch to your other one.

    In addition to the benefit of not disrupting your business, this will help you get new merchant accounts, as it can be VERY difficult to get a second account after your primary one is shut off, since the processors will now consider you high risk.

  2. I ran into this same problem when starting my used laptop business in 2002. In order for me to get my limits as high as I needed them, they wanted me to put $30,000 in an account to just sit there in case I ended up being a fraudster. They said after 1 year in business I’d be able to ask for an account review and ask them to release the deposited funds. I ended up talking them into a lesser deposit, but still had to have money just sitting there for nearly a year. I wondered the same thing you’re wondering: How do big businesses get the high limits they need instantly? Do they all have to put huge sums of cash in an account? I’m guessing there must be a better way for start-ups…. I just couldn’t find it. It’s hard enough getting a reputable company to give you good rates (I recommend Sam’s Club merchant solutions by the way, at least for their rates, if you want to stick with your bank’s processor at least start with a quote from Sam’s and then make your bank compete with their rates).

  3. I just started using google checkout to process my online credit card orders. Does anyone know if they place limits? Also for every $1.00 you spend on google adwords they will process $10.00 of credit card transactions for free.

  4. Best merchant accounts in the whole world –
    1) Paypal Merchant Accounts – they have virtual terminal usage (card not present), no monthly limits and an api that you can incorporate into your shopping page. It’s amazing.

    2) Through Costco Business deals – you can sign up for a merchant through Costco. You save a ton on fees and also have some sort of higher limit/insurance with your membership.

    Mark Newman

  5. RE: Apex, NC

    Google sent out some PR last year or this year regarding searches for the word “Sex” and how Chicago had the highest amount of search for that KW.

    The actual explanation for that is probably that about 90% of Illinois and probably Wisconsin and Indiana internet traffic flows out of a bank of routers at elmhurst, IL so it looks like everything is coming out of Chicago. If you look at a lot of keywords like sectional sofa or sofa, they have the most amount of traffic coming out of Apex so I’m thinking that something like 1/2 of the eastern seabord traffic is routed through those servers.

    Just my guess.

  6. Paul-
    I did a Google Trends search for “aftermarket auto parts” and found that Apex, NC was by far the highest ranking city. I don’t think it’s possible that a town of 20,000 is possibly the cause of all of these searches. Apex also happens to claim themselves as “the Peak of the Triangle” meaning the Research Triangle Park, the largest high-tech research park in the world and, according to Wikipedia, often compared to Silicon Valley. That might explain the high volume of searches coming from Apex.

  7. Hi Guys!

    I wanted to share with you a very good resource of information. This information helped me to find detailed information about merchant accounts. And I am sure it would be also beneficial for you guys. This e-book has lots of information about merchant accounts like Basics of merchant account, Guide to choosing merchant account, Benefits of obtaining a merchant account. This is the URL of e-book

  8. Paul, we ran into this problem this year and our merchant account provider wouldn’t budge…they would only give us the average bank account balance for the past three months (how do you grow that way?). It was awful trying to work with them. It turns out they were some kind of middle man and that working directly with one of the big 7 companies is the way to go.

    My friend, Bryan Johnson (bryan AT everleaf DOT net), got us a huge increase we needed to grow with Paymentech. I had to personally guarantee, but we got the flexibility to grow. I give Bryan’s name because I was hitting wall after wall and very frustrated with the problem. It’s difficult to find someone to trust in the industry and to wade through all the information.

    Good luck to everyone. All entreprenuers are thankful for this problem, but it can be tricky one to solve. 🙂

  9. Paul –

    I had this problem with in its first 18 months. It was a repeated pattern: we’d hit our merchant account limit, lose some business, run a fire drill, push the merchant processor, get a small increase, and then the whole thing would happen again a few weeks later. We often had to threaten to switch to a new merchant account to get our currnet merchant processor to grant us the increase. Once or twice, we had to make good on that threat – which ultimately got us increases with the new processors who were eager to get our business. Still – it was a huge hassle – and why? Because he grew so fast that they were constantly worried that we (or our customers) were doing something shady. Very strange that this can still happen after so many internet companies throughout the mid-late 90s have proven that rapid growth is possible. Wish I had a solution to help new companies avoid it. I hope I’ll need that solution myself soon as I’m now building a new eCommerce site.

    Chad Fullmer

  10. Paul,

    What is even most unfortunate that many Merchant Account Providers will never tell you issues like Fraud, Chargeback, and Merchant Account Limits, a critical component if given a deaf ear could lead to an account being terminated and cause a business shut doors. It is almost near impossible to have a new account established the second time.

    It only deserves to be mentioned that 75% of internet business could never make it or fail altogether?

    You know why? Because not having a complete website which walks with you hand-in-hand to set up your Merchant Account and run one successfully.

    I am in the process of developing an extremely dynamic website which will reveal man may facts that no one has neither attempted nor ever rendered.

    Look out for me soon

Leave a Reply


More Posts Logo Design

Some of you know that my partners and I are launching a new company that aims to help a billion or more people soar with

Cold Showers Can Benefit Your Health

I hated what I read in the Harvard Business Review last Friday: Cold showers have health benefits. I’ve always ignored people who advocate taking cold

People Like Me Need People Like You

“People Like Me Need People Like You” Someday I’ll write a book about I’ll highlight the people who built Ancestry from the ground up–unsung

The Team Coaching Zone Podcast

To listen to this podcast, click HERE. Announcer: Welcome to the Team Coaching Zone podcast. Join your host Dr. Krister Lowe and today’s leading organizational

My Favorite Artist

Artists, poets, and prophets can help us make sense of the craziness that we experience in the world. My favorite artist is Regina Spektor. When

The Coach You Need

When you need a helping hand in life or at work you might decide to hire a coach. There are many amazing executive, career, leadership,

Beware of Taking Advice

Next Friday I get to deliver a keynote at Phoenix’s biggest startup event. But beware of taking advice from me–or anyone else. Startup events are

An Entrepreneurial Superpower

One of my entrepreneurial superpowers is asking questions at scale. Before I started Ancestry I went to libraries and conferences and asked questions. I learned

Paul hopes to bring the strengths message to all 50 states and to 50 countries by 2025.
Contact him so he can help you spark a strengths movement in your area, company, or industry.