Pin Debit vs. Signature Debit: Which is Cheaper?

People often prefer debit cards over credit cards because debit won’t land them in excessive debt, and there are no monthly payments of which they need to be aware. Cardholders can put a limit on their debit cards, just like their credit card. When using a debit or credit card, it’s crucial to match it to a need or a goal. 

However, there’s still one essential question to answer, and that is deciding which debit card is more secure – a pin or a signature-based card? EMC2 Billing can provide insight to help businesses lower costs from each debit or credit card transaction. Here’s our guide to pin versus signature-based cards.

Related: High Risk Payment Processing

What is a pin debit?

A pin debit transaction is where the customer has to enter their personal identification number to complete the purchase on their debit card. There’s a subsequent charge for the transaction, which is determined through the debit network.  The debit network fee is made up of a flat transaction fee (0.05%), percentage, annual fee, and switch fee.

All the above fees are known as interchange fees, which is the merchant’s bank account that pays the card-issuing bank when the customer makes a purchase using their debit card. These fees cover any risks, bad debt, fraud, and handling costs incurred during the approval of the payment. Keep in mind that the interchange fees are not static.

What is a signature debit?

The signature debit transaction allows the customer to complete the transaction by putting in their signature instead of their PIN. This type of transaction runs the card as a credit even though it’s still debit. That is because the signature debit transactions go through the credit networks and not the debit networks. Because of this, they are referred to as offline transactions.

This transaction is subject to the three processes in the credit network: interchange, processor markup, and assessment. The interchange fees in the credit network are nonnegotiable and are unfixed. With some debit cards, they can be less than one percent, and on others, they can be as high as 3%.

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Which one is cheaper?

There is no “one size fits all” answer to this because the interchange fees vary from one card to another, and it also depends on the type of transaction. However, organizations that have large average transactions will find pin-based transactions more affordable to process. On the other hand, small businesses typically have lower than average transactions and find signature transactions to be a cheaper option.

Signature debit offers lower transaction fees, but they have higher percentage fees while pin debit has higher transaction fees and low percentage fees. 

Related: Merchant Cash Advance

Factors affecting cost 

a bunch of $100 bills flying around

The cost of debit transactions is affected by several factors, such as:

Regulated and Unregulated Debit Card

A regulated debit card is obtained from a bank that has more than $10 million in assets, while unregulated debit means that the bank issuing the debit card has assets worth less than $10 million. According to the Durbin amendment, regulated debt has a fixed cap of 0.05%. The card issuers who have less than $10 million have not been regulated on how much they can charge to move funds during transactions. That means they can charge what they choose.

It can be challenging to tell which cards are regulated and which ones aren’t. Keep in mind that with a regulated card, a smaller transaction will equal a higher cost of interchangeability. Therefore, a regulated debit card makes sense for higher transactions.

The Durbin amendment allows the regulated card issuing bank to have an additional $0.21 in transaction fees.

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Network pricing

Network pricing drives the cost of the card because each network has its specific pricing for all the transactions.  Signature transactions that run through credit card interchanges come with pricing for the fee program. This process is referred to as the merchant’s business type as well as the interchange rate, which is like a visa card or the rate for the regulated card. The regulated card will have 0.05% plus the $0.21. The unregulated/exempt card will have an interchange rate of 0.80% plus $0.15.

For pin debit, the transactions are the same as the ones in the signature transaction. However, the interchange rate for exempt cards is 1.00% plus $0.04, while the regulated debit transaction remains 0.05% plus $0.21. Remember that pin transaction also comes with a switch fee, which is typically between $0.03 and $0.08 depending on the network and the merchant.

Ticket size

The rule of thumb is that the higher the business transactions, the lower the effective cost. This rule applies to both pin and signature debit. With that in mind, the signature debit is a cheaper option on all the other networks.

Because the pin debit transaction has a fixed transaction fee of 0.05%, any pin debit transaction (even one where the customer spends as little as $20) will result in high transaction fees to the card-issuing bank from the merchant. This is manageable for larger organizations that have higher transactions, totaling thousands of dollars and higher profit margins. 

The same scenario for a small business could be crippling in the long run, especially when opting for the signature transaction that can be as low as $0.23, therefore, retaining a lot more of the transaction as part of the profits. The merchant also has to pay processing markup fees, which are a flat rate for pin transactions but vary for signature transactions.

Related: Terminated Merchant File


Debit transactions offer merchants better protection from chargebacks, as they have a more rigorous process compared to credit cards. It’s especially tricky to get chargebacks approved by the bank on transactions that were completed using a PIN. Chargebacks are expensive on the merchant, and they can also damage a business’s reputation. Some platforms refuse to work with a vendor with too many chargebacks.

However, because of the intensive chargeback process on debit cards, customers prefer to approach the merchant directly for a refund. This saves both parties a lot of trouble and costs.

Other considerations

spoon balancing on a calculator with coins and potatoe

It’s always advisable to have an audit of the debit transactions and systems to ensure that the business is enjoying some cost-effective transactions. A review of the amount of regulated volume and how much you’re spending on processing both regulated and unregulated debit will reveal areas that need improvements. Be sure to specify during the audit that the processor should show debit rates for both pin and signature transactions.

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The biggest takeaway when comparing pin and signature debit is that no one can ever be complacent and believe either choice is the only one applicable to their business. Learning more about pin and signature debit will help businesses manage their transaction and extend their saving correctly. Sometimes cardholders may need to incorporate both types of debit to reap the rewards and benefits that they deserve.

At EMC2 Billing, we provide services that can guide high-risk business owners to decide the type of debit card they should use and ways to lower transactions. In the industry for several years, we have helped a lot of business owners reduce transaction costs. Check out EMC2 Billing to talk to a merchant expert today.

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Opening a High-Risk Merchant Account? Here’s what you should know

Online transactions are quickly taking over in global commerce, and this means there are more protocols and regulations in place. As a result, more accounts are treading the classification of being high-risk. 

A High-Risk Merchant Account has to navigate the world of online sales a bit differently from regular accounts. These accounts come with added restrictions and more fees. 

At EMC2 Billing, we’re equipped to handle the processing needs of high-risk merchants, and can approve your business in as little as 24 hours. In this piece, we’ll dive into the key things one should know about opening a high-risk merchant account. 

What’s a High-Risk Merchant?

High-risk merchants are any merchant that’s been classified as operating in an environment that comes with added risks. Typically this ‘risk’ is qualified as a higher incidence of fraudulent transactions. 

For example, online payments are typically carried out using a credit card, and the main credit card networks (e.g. Amex, Visa, Mastercard) all charge a fee to a merchant for using their network. Merchant Service Providers also charge a processing fee to help carry out this transaction (e.g., Stripe), and all this is deducted from the original seller. 

Both the credit card company (in this case known as a processor) and the MSP assume risk when they process this transaction on behalf of the seller (merchant). If a buyer’s credit card was stolen or used and the charge was determined to be fraudulent, both the processor and MSP bear some cost. Because of this, some merchants are classified as ‘high-risk’ when the processor and/or the MSP believe there’s a higher chance of fraud. They may be less likely to  choose to work with the merchant, and they’ll charge premiums or impose additional restrictions to cover their bases. 

How is risk determined?

The risk levels of your business are determined primarily by the MSP and when a business owner applies to open a merchant account with the MSP. The process begins with the MSP evaluating various details related to the applicant’s business as well as the owner’s personal history.

Some examples of this include:

  • Business financial returns
  • Years in business
  • Industry business operates in
  • Previous history of merchant accounts elsewhere, and whether the registered business has been blacklisted on any systems such as MATCH or Terminated Merchant File (TMF) held by the MSP or Credit Card.
  •  Personal credit history of business owners

What makes you a High-Risk Merchant?

A big contributing factor to whether a merchant account is classified as high-risk is the category the business opening the account operates in. Specifically, the product, service, industry, and any practices it engages in. 

But in general, there are three key activities in payment processing that commonly make any merchant high-risk, these are:

1. Card-not-present tractions are the norm

If a business is online, for example, then nearly all transactions occur virtually and the credit card or payment method is never presented physically for inspection by the seller. Naturally, this means any form of purchase that doesn’t involve the payment card being presented has a much higher opportunity for fraud to take place.

2. A high volume of transactions

If a merchant processes a lot of transactions, then this also increases the percentage of chargebacks that occur. MSPs will take the quantity of transactions into account in assessing whether a merchant is high-risk. 

3. High average order value

Coupling with high customer volume is the average order value that a merchant carries out. After all, a fraudulent transaction for $5 is viewed very differently by an MSP or credit card company from a transaction valued at $5000. This means MSPs will view any merchant that sells high ticket items online as riskier. 

Beyond these three, here are specifics that may deem a merchant account as high-risk.


One aspect that may automatically qualify an account as high-risk is based on what sort of products the merchant sells. Credit Cards or MSPs may have historically seen a greater incidence of fraud when certain merchants sell specific products, and this has resulted in the broader categorization of ‘high-risk’ associated with these types of products:

  • Firearms and ammunition
  • Adult products
  • Drug paraphernalia
  • CBD products
  • Etc.

The list varies between different providers but these are common categories that will be flagged as high-risk.


Similarly, merchants that provide certain services can also be considered high-risk.

Many forms of subscription billing, for example, regardless of the service sold is a common broad category that has merchants flagged as high-risk. Some examples of such a service are:

  • SaaS (Software as a Service)
  • Loyalty programs
  • Media memberships

These services are often ‘intangible’ and can result in a higher incidence of chargeback occurring as buyers don’t understand the service being provided to them or are unsatisfied with the results.

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The merchant’s overall industry can immediately flag them as high-risk regardless of their historical performance and low incidence of chargeback occurring. Some common high-risk industries are:

  • Pharmaceuticals
  • Gaming
  • Adult Entertainment
  • Travel and Lodging


Certain practices offered by a merchant can also result in a higher risk category assigned to them. 

Some examples of this include when merchants offer promotions such as:

  • Free trial
  • Free product
  • Only pay for shipping
  • Extended warranty
  • Money-back guarantee
  • ‘Get rich quick’ offers

Any of these practices can mean a merchant is classified as high-risk. 


Now, if one’s merchant account doesn’t tick any of the above boxes, there’s still a chance it may be flagged as high-risk. This simply comes down to the historical records of the merchant and how they work in its favor. 

After all, if one’s business has had a long history of business with very few chargebacks and no issues with any other merchants or credit card providers, there’s a good chance they’re low risk.

Conversely, if the business is new, they have a very limited history of operating as a merchant. An MSP is taking a gamble with them, and a problem as simple as a dissatisfied customer can pose a threat to your company’s ability to have merchant processing. 

Some areas that an MSP may look into are:

Credit behavior

MSPs will look into both the credit scores of the business and its owners. They use this as a way to determine what processing rates should be provided. Low credit scores can still get approved but may result in higher processing fees. Furthermore, they’ll look into which credit card processors have engaged with the business and whether the company owes any outstanding debts. 

Chargeback ratios

This is one is considered one of the most influential factors in immediately determining if a merchant is high-risk. If a business has monthly chargeback ratios of 2% or above, then it is considered high-risk. MSPs will also check the MATCH list to see if one’s merchant is on the list for committing fraud or operating illegally or without compliance. If a merchant is on this list, then popular MSPs will usually prohibit them from opening an account with their services.

Are you a high-risk business? Find out why EMC2 Billing is the right MPS for you.

Factors to consider

Sometimes it’s inevitable to be a high-risk merchant. Aspects such as being part of a specific industry, or processing a high volume of transactions are just part of the business. 

In such cases, there are usually a few things to consider if one is a high-risk merchant:

1. Pay more per transaction in fees

High-risk merchant accounts always pay more per transaction than lower-risk accounts. If one is flagged as high-risk, then it’s common to see a 1 to 2% add-on to standard processing or transaction fees offered by the MSP. 

Some MSPs specialize in operating high-risk merchant accounts and these will commonly come with favorable fee rates, but in general, one can expect to pay more. 

2. Hold a reserve of cash

MSPs may also ask a merchant account to hold reserve accounts. These are either Rolling Reserve, Up-Front Reserve, or Fixed Reserve Accounts. They all are used by the MSPs to hold a set amount of funds as insurance. This ensures if there are any fraud or chargeback instances, the MSP can reverse those transactions using the funds held in reserve by them.

Rolling Reserve
This type of Reserve account is commonly used by MSPs to hold a certain percentage of a merchant’s daily revenue for a set term. After this term, the funds are released to the merchant to deposit into their bank.

Up-Front Reserve
Less common but also applicable are up-front reserves where an MSP may require a set value of funds to be transferred up-front when the merchant account is opened. These are then held in escrow and either released after a set term, or until an equivalent amount is collected via Rolling Reserve.

Fixed Reserve

Fixed Reserve is when the MSP and Merchant agrees on a set value to be held in reserve, as opposed to just a percentage of daily revenue that’s eventually released. This set amount is then collected via every transaction and once its met, no more percentage of revenue is collected and held in reserve by the MSP. 

3. Account freezes

In rare instances, MSPs may occasionally freeze a high-risk merchant account when they begin to detect any fraudulent activity in the account. In such a case, the account is frozen until an assessment is carried out by the MSP to determine whether it’s safe to continue operating the account. 

When this happens, any processing of payments by the account will be disabled until the freeze is lifted. An assessment by the MSP will usually result in either changes to the agreed-upon merchant agreement, permanent termination of the account, and in rare but extreme cases criminal action may be pursued. 


Somewhat unavoidable in most cases, opening a high-risk merchant account is common these days given the prevalence of online product and service transactions. However, remaining vigilant about the MSPs you partner with and providing transparency about your business will help an MSP trust you and offer you favorable terms. Partnering with EMC2 Billing can set you at ease. Our Merchant Processing systems are uniquely tailored to high-risk merchant accounts. Find out more about us here.

How to Prevent Chargebacks

As more and more transactions are carried out online, instances of chargebacks are growing along with it. Providers flag many merchants as high-risk as newer industries begin to expand. If one’s a merchant categorized as high-risk by a Merchant Service Provider, then this translates to more significant restrictions on what the merchant can sell and higher fees associated with each transaction.

At EMC2 Billing, we provide reliable and accessible payment processing to high-risk merchants. With our expertise, we’ll dive into the definition of a chargeback and some tips on how to prevent them.

What is a chargeback?

Chargebacks are commonly associated with credit card transactions that occur ith online wmerchants. Typically when the owner of the credit card has an issue with the posted transaction on their credit card, they’ll contact their credit card issuer to dispute the transaction. 

Common reasons for a dispute are:

  1. The product or service purchased was never received
  2. The product or service did not accurately reflect what was described as being purchased (e.g., significantly poorer in quality).
  3. The transaction value is incorrect.
  4. The transaction itself is fraudulent and was never placed by the buyer. 

These are just the four most common causes of chargebacks, but there are more. Any of these dispute reasons will result in the credit card issuer triggering a dispute with the Merchant Service Provider (MSP). This will cause the MSP to debt one’s merchant account for the disputed value, and typically add on an extra dispute fee (usually between $15 to $100). This disputed value is then returned back to the credit card. 

Many times, disputes are avoidable and rarely are they truly fraudulent. They can also be more common with high-risk businesses. Let’s explore in detail the reasons for chargebacks occurring:

Reasons For Chargebacks

Chargebacks fall under three main categories:

Technical error

This is when the chargeback occurs due to a simple technical error during transaction processing. Examples of this include billing an incorrect amount, failure to apply a discount or coupon code, or authorizing a refund but not returning the money to the customer. There are many more ways a technical error could happen, but these are the common ones. 

Unhappy customer

The second most common reason for a customer triggering a dispute is not being satisfied with a product or service they purchased, and in rare cases, the overall customer service they were provided when interacting with one’s brand. 

Many times, what’s advertised by a brand as a product or service they’re selling may be inflated in quality versus what’s actually shipped to them. A physical product may look exceptionally high quality and well-built online, but when actually received in the mail, it might look very cheap. In such a case, if there’s no easy way for the customer to ask for a refund or voice their concern, a dispute is their next best option in getting their money back.

Long shipping times or lost items can also cause chargebacks to occur where the customer claims to have never received the item and thus starts a dispute to get their money back. Sometimes companies will also have unclear return or refund policies that cause customers to buy their product or service. Still, when they realize that getting a return or refund isn’t straightforward, it becomes easier for them to trigger a dispute. 

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Finally, the main reason the dispute and chargeback process exists is to prevent fraud. This can be defined as when the:

1) The customer does not recall ever authorizing the purchase

2) The customer’s card was stolen and fraudulent purchases were made
3) The merchant has charged the customer’s card without seeking permission/authorization from the customer first

When a chargeback occurs, the merchant will receive a categorized reason for why the chargeback happened (e.g., product not received) and the merchant then has a set number of days to provide evidence to the MSP to challenge the chargeback and prove it was authorized by the customer. 

In all of the cases above, the customer is usually favored by the credit card issuer instead of the merchant, and it’s very difficult for a merchant to win a dispute even after providing sufficient evidence. This is why it’s good to get ahead of the problem and ensure chargebacks don’t occur in the first place. Let’s take a look at some ways to prevent chargebacks:

Ways of preventing chargebacks

1. Clearly communicated and visible policies

An easy way to prevent chargebacks is improving all publicly available communication material on one’s site that a customer might read through before purchasing a product or service. 

For example, refund policies should be easily available to reference on every page a customer will go through when completing a transaction. In addition to this, clear statements regarding ‘trials’ or ‘refunds’ should be displayed. When completing payment, for example, display a fine line item reiterating one has 30 days to request a return/refund instead of assuming the customer will dig through a brand’s policies to read up on the policies themselves. 

2. Verifying payment methods

When a cardholder completes a transaction, the most basic required information is the credit card number, expiration, and sometimes CVV/CVC. However, there are options to request for more details to be verified. Asking for the customer’s billing address and cardholder name can be used to run an additional match to ensure it’s the authorized cardholder making the purchase. 

 3. Accurately described services or products

False advertising is a major driver for chargebacks occurring. If a brand promotes a fine-crafted leather bag to only deliver a poor-quality product in the mail, a chargeback may occur. 

The same goes for services provided online by businesses. If the description of the service is vague and open to interpretation, then many buyers may be expecting one quality of service or range of services offered versus what’s actually delivered. A way to combat all of this is to ensure the description of a products/service, and any supporting images or videos are realistic and accurate. 

4. Billing statement and brand name should match

Many times a business may operate under one name, but have their merchant account name under another. This means customers may see a transaction from a merchant they don’t recognize when looking at their credit card statements. Even if they made the purchase, they might report it as fraudulent. 

This is why ensuring the name of one’s brand and the billing statement name are identical is crucial to avoid such instances of confusion. This happens often, since customers sometimes only review their credit card statement at the end of the month. Long after they’ve purchased an item from your business, they might immediately assume it’s fraudulent since quick checks of the billing statement name in their emails would yield no result of a receipt or order confirmation. 

5. Seamless customer contact channels

Customers should also be kept aware of the entire buying process. Once they’ve completed a purchase, they should be alerted when the order is fulfilled, shipped, and delivered. 

In addition, there should be multiple channels available for them to reach out for clarification on order (e.g. live chat, email, phone) and these must have quick response times. If not, then a customer is forced to dispute the purchase as their attempts to resolve their concerns directly with the merchant have failed. 

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6. Have an audit trail

Chargebacks can be challenged if a business presenting strong evidence that the customer was aware of the purchase and confirmed the authorization. This means that any communication one has with a customer should be collected, along with other information such as whether emails have been delivered and received. 

All of these provide a clear trail of evidence that can be used to fight any chargebacks that are incorrect. In addition, there should be evidence that no information was withheld, such as receipts or invoices never mailed to the customer once an order was made. 

7. Train staff to identify instances of fraud

A good line of defense againt chargebacks is ensuring that staff have been trained to identify any instances of fraud. Examples of this include unusually high volume orders or transactions from areas where you do not usually receive business. Comparing shipping and billing address information, and whether the name matches the cardholder name,  are also easy ways to spot fraud. When fraud happens, these strategies can help staff get ahead of a chargeback by canceling the transaction and refunding the amount charged immediately.

8. Use fraud prevention tools

Finally, given the prevalence of chargebacks these days there are many third-party software or add-ons offered by MSPs that help to detect any instances of fraud and flag them for a business. Merchants can also adjust their sensitivity towards fraud, such as any cart over a specific dollar amount is not automatically processed until it’s independently verified by staff through reaching out to the customer. Similarly, the same automation can be applied to verifying whether billing and shipping addresses match, etc. 

As an online business thrives and grows, there will be more instances of chargebacks happening. Because of this, it’s important to get ahead of the scenario and implement any measures necessary to ensure the chances of disputes happening are minimized. At EMC2 Billing, our experience with high-risk merchant accounts means we’re experienced with chargebacks; we know how to prevent them and what to do when one occurs. Find out how to get started with EMC2 Billing here.

What To Do When Stripe Shuts You Down

Stripe is an American online payment processing platform whose parent company by the same name operates out of San Francisco. Among its customers are big names like Uber and Google. The platform also caters to smaller businesses across over 30 countries.

While Stripe has generally been lauded for their reliability, the problems of a large company have certainly become more readily apparent of late – more and more merchant accounts are finding themselves mysteriously (and abruptly) shut down. 

Ready to move on from Stripe? Check out EMC2 Billing.

Why Stripe shuts down merchant accounts

The terms and condition of Stripe says that the company reserves the right to terminate business accounts that they believe pose an elevated financial risk or legal liability. They also reserve this right in violation of bank or card network policies. They can also suspend any pending payouts if they deem it necessary to take such action.

Many start-ups are taken by surprise when Stripe shuts down their accounts without fair warning. Be;pw are some of the most common reasons accounts are shut down:

Prohibited activities

Businesses that deal in any of the platform’s prohibited or restricted activities will get shut down. If one is to continue operating a Stripe account while undertaking any of these business ventures, they must receive prior written approval from the company. Some of the businesses include 

  • any multi-level marketing schemes
  • High-risk businesses like remoter technical support and travel reservation services
  • Any businesses dealing in drug paraphernalia and illegal drugs
  • Charities without proper registration
  • Business with foreign consulates and foreign governments
  • Pseudo-pharmaceuticals
  • Virtual world credits
  • Aggregation
  • Mug shot publication
  • Adult content and services
  • Counterfeit products
  • Gambling
  • Virtual currency
  • Money and legal services
  • Credit services
  • Investment services

These are all businesses that will get shut down by Stripe without receiving express permission. Businesses who partake in these endeavors without authorization may even lose the funds in their Stripe accounts.


Having chargebacks posted on an account is a huge red flag for Stripe. A chargeback occurs when a bank returns money directly to the payer. With chargebacks, the customer is technically asking the bank to forcibly take back the money from the business’s account without the customer having to return what was purchased. 

This raises a red flag for Stripe because the poor reputation of a merchant reflects negatively on their business, not to mention they are losing money.

High dispute rates

Stripe is also very vigilant about the dispute rate of the merchants they work with.  A high dispute rate will cause an account to be shut down. Just like with chargebacks, the best way to mitigate the disputes is to provide exceptional customer service. Stripe is always re-evaluating businesses to see with whom they can continue to work with. High dispute rates can negatively affect a business’s reputation as well.

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What To Do In Case of a Shut Down

Unfortunately, once Stripe shuts down your account, it is more than likely that it will never be re-opened with this MSP. This has been the trend with all the merchants that have had their accounts closed. So instead, take steps to prevent future shutdowns.

This entails being very responsive with clients, especially when communicating about anything that raises a conflict. It’s a frustrated customer who will be pushed over the edge to demand a chargeback. If your customers are generally satisfied, they’re more likely to resolve matters with you (the vendor) directly.

Also make sure that the refund policy is workable for all partied involved and will leave the customer feeling happy. 

Make sure one’s business has an efficient system in place that quickly updates cancellations to prevent racking up chargebacks. Trying to reopen your account with Stripe may be time consuming. Plus, similar issues may arise in the future.

Alternatively, one may need to find an alternative platform to continue doing business. At EMC2 Billing, we offer merchants equally amazing features while protecting them from chargebacks and fraud. Because we specialize in serving high-risk merchants, we’re well-equipped to handle your needs. Plus, we can approve you in no time – as short as 24 hours.

Most people today are starting to opt for a dedicated merchant account.

The dedicated merchant account is an account that the account solutions provider exclusively establishes for merchant’s business. It works like a personal, internet-based bank account created solely for one’s online business. A dedicated merchant account allows the merchant to process online debit and credit payments. The funds from the merchant’s payment gateway are funneled into the merchant account then automatically routed to the business account.

Final Note

Stripe remains a popular online payment platform, certainly giving PayPal a lot of competition as they climb aggressively up in market share. However, their policies can be very stringent and they also tend to leave little wiggle room for making one’s case when an account gets shut down. At the end of the day, the best one can do is take steps to make cancellation processes fair and transparent, manage their username fairly and minimize chargebacks however possible. When Stripe shuts you down, get started with EMC2 Billing and do what you can to prevent fraudulent purchases in the future.

Why Did I Get Shut Down by PayPal?

Online selling is doing extremely well thanks to online vendors focusing on providing excellent merchandise and services. One of the preferred payment options that online sellers like to use as a payment gateway is PayPal. That’s because it’s recognized the world over as a reliable service for peer to peer payment. 

A majority of online business owners use PayPal to receive credit card payments on their websites. This seems like a symbiotic relationship that has a small chance of going wrong.

If PayPal closed your account, get started receiving payments again with EMC2 Billing.

So why would PayPal shut down an account?

Shutting down a PayPal account can drastically affect one’s online business. Most people that don’t understand why their account was shut down didn’t take the time to read some of the terms and conditions of receiving payments from PayPal.

Usually, apart from providing correct bank details and other personal details, opening a PayPal account is fairly easy and unrestrictive. What PayPal does, however, is monitor accounts closely. At any slightest anomaly that is not in line with the platform’s terms of use, the account will be shut down.

Amongst PayPal’s many terms of use, providing false, inaccurate or misleading information can lead to account closure. So can engaging in potentially fraudulent or suspicious activity and/or transactions.

Knowing what terms PayPal expects of its users can help one to avoid breaching their terms and getting shut down. For instance, PayPal does not support the selling of certain products such as tobacco products like cigars, cigarettes, e-cigs and vaping products. The truth is one may get away with a few sales, but it’s only a question of time before PayPal picks it up and gets in touch to inform that the vendor is in breach of their policy. This could easily lead to a shutdown of the account.

Some of PayPal’s security checks on a vendor or PayPal user also monitor the amount of money coming into an account and the frequency. PayPal accounts now have a limit on what amount of money an account can receive at one time. That means any time an account receives more than the prescribed payment limit, the PayPal security system prompts an alert that seeks to verify the user’s ID and current address. With internet fraud so rampant, PayPal’s account monitoring and policies are quite strict. If the required documentation is not provided, that means the vendor is in breach of PayPal’s policy and their account will be shut down.

The inconvenience of a closed account for a PayPal user can cripple a business, freezing funds up to six months. 

What makes the frozen account all the more frustrating is that it’s extremely difficult if not impossible to get a hold of a PayPal employee on phone or via email to address the situation. 

Additional common reasons that may lead to a PayPal account getting shut down abruptly or being limited include:

  • An upsurge in sales that are significantly above average
  • Introduction of new product to a business
  • Selling products that are deemed questionable
  • Presence of any content that may be deemed questionable on one’s website or on social media platforms
  • Violation of PayPal’s policy
  • Any real or suspected fraudulent activity on one’s account
  • Conducting business with other vendors who are blacklisted by PayPal

It’s highly advisable that PayPal users take some time to go through the terms and policies of this payment service to ensure they do not inadvertently contravene some regulation that’ll culminate in the freezing of an account

Upon going through the terms and conditions as stipulated by PayPal, some of the language might seem vague and cause a wide variation in interpretation. For example, one regulation says that PayPal will take action if one “takes any action that may cause us to lose any of the services from our internet service providers, payment processors or other suppliers.” Since it’s unclear who their vendors are, it might be difficult for companies to adhere to their regulations and they might eventually find themselves with a shutdown.

Find out how EMC2 Billing can help your high-risk business.

What is the next best option

If one wakes up to a shut PayPal account or it has become apparent that PayPal is not the right payment gateway for one’s business, then what? Fortunately, there are other payment services that can get the job done without the ever-lingering worry that a business account may be closed abruptly. One of those solutions is getting a merchant account with merchant services. 

Business owners appreciate one thing: to be forewarned is to be forearmed. When opening a traditional account with merchant services, they take the time to communicate their terms and policies accurately as part of their verification process before an account is issued.  This helps to avoid any nasty surprises ahead. The fact that one has access to a round the clock customer support that is ready to help out with any arising issue, is very comforting. At EMC2 Billing, we’re here to answer your questions and have foolproof payment processing. 


Although PayPal is a common payment processing service, many fear the inconvenience of having their accounts closed or frozen abruptly without much of an explanation or an effective avenue for recourse. If one has to go another route, payment services like EMC2 Billing might be the right option. If Paypal shuts you down, get started with EMC2 Billing for the merchant service you deserve.