Having a next day funding merchant account can offer business owners important benefits in terms of cash flow. Many credit card processing services are quick to explain the benefits of NDF, but are less likely to explain what it is and how it works.
Myth #1: Everyone benefits from a next day funding merchant account.
NDF will provide the most benefit to those businesses how to sell merchant services with irregular cash flow. If your business receives most of its income on the weekend, a bar for example, NDF would allow you to receive your large weekend deposits on Monday instead of Tuesday. A car dealership is another example of a merchant who could benefit from a next day funding merchant account because their cash flow changes greatly from day to day. However merchants who have a consistent cash flow would not benefit as much from NDF. This is because their deposits do not fluctuate throughout the week.
Myth #2: Memo posting and next day funding are interchangeable terms.
Memo posting the deposit and actually transferring the money into an account via ACH are NOT the same thing. Some banks will merely provide a memo post of the deposit, which means that the money may not in reality be accessible by the merchant that day.
Myth #3: You can create a next day merchant account at any bank.
Many credit card processors will only allow NDF to a merchant if their account is active at the sponsoring bank. This means you can’t just walk into any bank and get a next day funding merchant account, especially if you don’t have a relationship with a sponsor bank.
Myth #4: There is only one cut-off time for next day funding.
This is simply not true. Cut-off times range greatly between processors and can be as early as 12:00 p.m. EST or as late as 9:00 EST. If you have to batch out before your busiest time of day, the service will not be that beneficial to you.
Myth #5: There is no risk to merchant services providers with next day funding.
Next day funding merchant services will always come with some amount of risk. The main risk comes from the decreased review time that goes into processing transactions. There are a wide range of risk aversion tactics that processors use, such as early cut-off times, delayed funding for unusual deposits or a detailed approval process. These tactics certainly decrease the risk, but do not eliminate it.
By understanding the differences between next day funding merchant accounts, you can select a merchant services provider that will deliver the most benefits to you.