Monthly Average Transaction Volume

The average monthly transaction volume for a merchant is determined by calculating the total number of transactions processed over a year and then dividing it by 12 months. However, in the case of a new business without a processing history, the merchant may be required to provide an estimation of this figure.

The average monthly transaction volume serves as a key metric that payment processors take into consideration when assessing merchant risk. Consequently, it can significantly influence whether a merchant's account is approved or denied.

A high transaction volume is viewed as a risk because each sale carries the potential for a chargeback, for which the processor might be held responsible. To manage this risk, some merchant accounts have specific limits imposed on their maximum monthly transaction volume.

Merchants are expected to stay within the monthly transaction limit set by the processor. Exceeding this threshold, particularly during the initial months of processing or when a substantial number of transactions are declined, could be seen as risky behavior. If a merchant consistently surpasses the volume limit, the processor may initiate a risk assessment. If this assessment reveals potential liabilities, the merchant account could be subject to closure.

To mitigate these risks, merchants may opt to establish and adhere to their own transaction limits that are set below the official processor-imposed limits.

Additionally, it's worth noting that processors may require merchants to maintain a reserve in their merchant accounts to offset any potential liabilities.