Load Balancing

Load balancing is defined as spreading transactions across several merchant accounts to decrease the risk of loss due to frozen accounts and chargeback rates.
« Back to Glossary Index

Load Balancing

For high risk accounts, the use of load balancing can keep business running smoothly. A business with high volume, high price, or above-average chargeback can spread its transactions across multiple merchant accounts.

Generally, load balancing is not considered to be a legitimate business practice. Instead, it is a workaround for high risk businesses. It is agreed that load balancing is a way to conceal.

When a high risk business uses a single merchant account they run the risk of having their accounts frozen while a transaction is in dispute. This means income halts.

To avoid the possibility of having the merchant account frozen, many high risk businesses will run their transactions through multiple merchant accounts. The problem with this scenario is that it is challenging to keep those multiple accounts straight.

As a result, there are financial gateways that will gather all those accounts and make them accessible through that single location.

While not illegal, the use of load balancing is not endorsed by credit card companies.

Credit card processing companies work as an intermediary and make load balancing possible through the gateway dashboards that help a high risk company jump between their merchant accounts to keep them below the threshold of asset freezing.

The processing gateways use several different formats to meet the needs of their clients. They can even spread the transactions, divide by charge type, or even break down accounts by credit card type.

In reality, the use of multiple merchant accounts can help high-volume businesses better monitor their transactions. By breaking down transactions the monthly reports are easier to understand.

Another benefit of load balancing is the ability to route specific transactions to a merchant account more likely to approve that charge. This is called channel segmentation.

By spreading the charges, a business also reduces the likelihood that a single account is penalized repeatedly. This lowers the chargeback percentage and can help a business avoid higher rates.

There are downsides to load balancing. Because it is a means to circumvent the protocols established by the credit card industry, those companies could penalize a business operating outside their established rules.

In addition to legal ramifications, if the credit card companies deem the actions illegal, they can also assess fines, bans, and merchant blacklisting.

Despite these possibilities, most high risk businesses, and many other businesses maintain at least two merchant accounts so they don’t have to shut down their revenue stream if they face account freezing.

While not officially sanctioned by credit card companies, load balancing is the simplest way to ensure business carries on every day.

« Back to Glossary Index

Related Terms:

CTA Title

Sed ut ullamcorper nulla, eu consequat turpis. Duis ac molestie orci. Suspendisse blandit ullamcorper eros

CTA Button