Average Monthly Transaction Volume

A merchant’s average monthly transaction volume is calculated as the total number of transactions processed in a year divided by 12 months. If a merchant is launching a new business and doesn’t have any processing history, the merchant may be asked to provide an estimate. 

Average monthly transaction volume is a metric that processors may consider when evaluating merchant risk. As a result, it can be a determining factor for merchant account approval or denial.

High transaction volume is considered to be a risk because every sale made could potentially become a chargeback — which the processor could be liable for. In order to keep risk in check, some merchant accounts will have a limit set for maximum monthly transaction volume.

If a processor sets a monthly transaction maximum, the merchant is expected to stay below the limit. Meeting the monthly threshold might be considered risky behavior — especially in the first few months of processing and if a significant portion of transactions are declined. If a merchant regularly meets the volume maximum, the processor may conduct a risk review. If the review reveals potential liabilities, the merchant account may be closed.

As a precaution, merchants may want to establish and abide by their own transaction thresholds that are well below the official limits set by the processor.

It’s also important to note that processors may require a merchant account reserve to offset any potential liability.