A merchant account that can be funded next day can provide business owners with important cash flow benefits. While many credit card processing companies are quick to point out the advantages of NDF, they are less likely than others to explain how it works.
Myth #1 – Everyone benefits from a next-day funding merchant account.
Businesses with irregular cash flows will see the greatest benefit from NDF. NDF will allow you to get your large weekend deposits on Monday, instead of Tuesday, if your business is primarily dependent on weekends, such as a bar. Another example is a car dealership, whose cash flow fluctuates from day to day. NDF is not as beneficial for merchants with a steady cash flow. Because their deposits don’t fluctuate throughout the week, this is why NDF is so beneficial for them.
Myth #2 – Memo posting and next-day funding can be interchangeable terms
The difference between memo posting the deposit and actually transferring money to an account via ACH is not the same thing. Some banks will only provide a memo posting of the deposit. This means that the money might not be available to the merchant that day.
Myth #3 – You can open a next-day merchant account at any bank.
NDF will not be allowed to merchants by credit card processors unless the merchant’s account is open at the sponsoring bank. This means that you cannot just walk into any bank to get next-day funding merchant account.
Myth #4 – There is only one time limit for funding next day.
This is false. The cut-off times vary between processors. They can be as early or late as 12:00 p.m. ET. The service won’t be as beneficial if you need to batch before your busiest times of the day.
Myth #5 – Merchant services providers are not at risk with next-day funding.
There will always be some risk when you use next-day funding merchant services. Processing transactions are subject to a shorter review period. This is the main risk. Processors can use a variety of risk-aversion strategies, including delayed funding for unusual deposits, early cut-off times, and detailed approval processes. These strategies can reduce the risk but not eliminate it.
Understanding the differences between next-day funding merchant accounts will help you choose the merchant services provider that offers the greatest benefits.