By: Money Navigator Research Team
Last Reviewed: 13/01/2026
FACT CHECKED
Quick Summary
A card terminal does not always stop working just because a business bank account is frozen. Many freezes affect access to funds and payouts rather than the instant card authorisation that happens at the till.
However, terminals can stop taking payments if the acquirer/processor restricts the merchant account, if settlement/payout routes are paused, or if risk controls trigger declines.
The most common real-world pattern is: payments may still be approved at checkout, but payouts are delayed or inaccessible, which then increases refund and dispute pressure.
This article is educational and not financial advice.
“Terminal working” can mean three different things
When someone asks whether a terminal “stops working”, they usually mean one of these:
Authorisation: does the customer see “approved” at the till?
Settlement/payout: does the business actually receive usable funds?
Merchant account status: has the acquirer/processor paused or closed acceptance?
Card systems separate authorisation from settlement. A clear explainer of the steps (authorisation through to settlement) is set out in Stripe’s guide to the card authorisation and settlement process: card payment authorisation and settlement explained.
That separation is why terminals can appear “fine” while cashflow breaks.
What a business account freeze usually affects first
A bank account freeze generally restricts what can move in and out of the account while checks or legal constraints apply. Even where the bank is the restricting party, other firms in the chain may apply their own controls.
- The Financial Ombudsman Service describes the kinds of complaints it sees around restrictions in its guidance on frozen accounts and blocked payments.
- The FCA has also discussed how firms approach account access, freezes and closures in its report update: UK Payment Accounts: access and closures update (PDF).
For the wider “what’s frozen and why” picture, see our guide on the difference between a frozen and closed business bank account.
The most common outcomes for card terminals during a freeze
Outcome A: The terminal still takes payments, but payouts are delayed or inaccessible
This is the pattern that surprises many businesses. Customers can pay at the terminal, receipts look normal, and the dashboard shows takings – yet the money doesn’t arrive in the bank account as expected (or arrives but cannot be used).
This typically becomes visible through settlement timing and payout holds. Our detailed explainer on card settlement payouts when a business account is frozen breaks down where funds can get stuck.
Outcome B: The terminal takes some payments, then declines increase
Even if the terminal remains active, risk controls can tighten. Declines may rise because:
the payment provider adjusts fraud/risk thresholds
certain transaction types are blocked (higher value, keyed transactions, refunds)
the merchant account is moved into “review” status
When declines rise, the practical impact is usually immediate: lost sales, longer queues, and staff time spent retrying or switching payment types.
Outcome C: The terminal stops accepting payments (merchant account paused)
In more restrictive scenarios, the acquirer/processor can pause card acceptance entirely. That can happen even if the terminal hardware is functioning – the block sits at the merchant account level.
If this happens alongside online acceptance issues, it can look like “cards are down everywhere”. Our broader guide on what happens to card payments when a business account is frozen covers how acceptance, settlement and payouts can fail at different layers.
Summary table
| Scenario | Outcome | Practical impact |
|---|---|---|
| Bank account frozen but merchant account still active | Terminal authorises payments | Sales continue, but cash may not become usable if payouts are delayed |
| Processor pauses payouts | Funds build in processor balance or are delayed | Working capital pressure; reconciliation effort increases |
| Risk controls tighten | More declines at the till | Lost sales; operational disruption; customer friction |
| Merchant account placed under review | Acceptance limited or paused | Terminal appears “broken” even though hardware works |
| Refund routes constrained | Refunds delayed/blocked | Complaints rise; disputes/chargebacks become more likely |
| Freeze escalates to closure | Acceptance and banking access may end | Payment rails need re-established elsewhere; trading impact rises |
Why payouts and reserves matter more than the terminal itself
Even if the terminal continues authorising, a freeze often creates pressure through payout delay and reserve increases:
Payout holds are explained in our guide on why payment processors hold payouts during account restrictions.
Reserve behaviour (including why it can rise during restrictions) is covered in can a bank freeze trigger higher processor reserves and payout delays? and rolling reserves explained.
This is often where the “terminal working” question turns into a cashflow question: the acceptance layer still functions, but the “getting paid” layer does not.
Refunds and disputes: the fast route from “freeze” to reputational damage
When payouts are delayed or funds are inaccessible, refunds can become harder to process quickly. That matters because refund delays can increase dispute volume, especially where goods/services are delayed or cancelled.
Refund mechanics during restrictions are covered in card refunds when a business account is frozen.
Dispute and chargeback consequences are explored in chargebacks when a business account is frozen.
For scheme context, UK Finance explains what chargeback is (and that it’s a card scheme mechanism rather than a statutory right) in its guidance on chargeback and Section 75. For a merchant-facing view of dispute standards, Mastercard publishes a detailed Chargeback Guide (Merchant Edition) (PDF).
Scenario Table
| Scenario-level | Process-level | Outcome-level |
|---|---|---|
| Bank applies account restriction | Funds access and outgoing payments constrained | Payouts may land late or be unusable; operational cash tightens |
| Acquirer/processor flags elevated risk | Payout schedules change; reserves increase | Net cash received reduces; settlement delays become visible |
| Refund demand rises | Refunds depend on permissions and available balance | Refund backlogs; complaint volume increases |
| Disputes increase | Chargeback processes and timeframes apply | Funds reversed; fees/admin load rises |
| Restriction lifts vs escalates | Controls removed or relationship ends | Acceptance normalises, or new rails are needed |
Can the business “still trade” if terminals keep working?
A terminal continuing to authorise payments is not the same as the business being able to operate normally. If payouts are delayed, suppliers and payroll can be affected even while sales continue.
Our guide on can a business still trade if a bank account is frozen? covers how operational breakpoints often show up after the first few days, once settlement timing, refunds and supplier payments collide.
Compare Business Bank Accounts
When card payouts are disrupted, businesses often reassess their wider banking setup (account features, multi-account setups, and how quickly payment rails can be supported operationally). A neutral overview of provider categories and key considerations is in our hub: business bank accounts.
Related context (because it often comes up during freezes): can you open a new business bank account if one is frozen?.
Frequently Asked Questions
Not definitely. A bank account freeze often affects access to money (payouts and transfers) more directly than point-of-sale authorisation.
Terminals stop accepting payments more reliably when the merchant account is restricted by the acquirer/processor, because that sits in the authorisation pathway. That can happen alongside a bank freeze, but it’s not the same mechanism.
Card payments are staged: authorisation happens instantly, while settlement and payout happen later. A freeze can bite at the “funds access” stage without automatically blocking authorisation.
This is why businesses can see approved receipts at the till while payouts are delayed, held, or inaccessible. The operational issue becomes cash availability rather than checkout acceptance.
A terminal decline happens at authorisation: the transaction is not approved in the moment, so the sale fails at checkout.
A payout hold happens after successful transactions: sales are accepted, but funds aren’t released to the business on the usual schedule (or cannot be used once received). The symptoms are delayed cash, reconciliation issues, and increased refund pressure.
Yes. Processors can pause or delay payouts as part of risk controls, reviews, or where settlement routes are constrained. In freeze scenarios, this is one of the most common forms of disruption.
When payouts pause, the business may still see sales data but not see usable cash, which can create payment friction with suppliers and staff even while revenue is being generated.
The underlying split between authorisation and payout exists in both, but online payments can have more moving parts (gateway settings, fraud tools, account review triggers), which can create different failure points.
That said, in-person terminals can also be paused at the merchant-account layer, so the “terminal vs online” difference is often about provider controls rather than the bank freeze alone.
Contactless and chip-and-PIN are both authorisation-based. If the merchant account is still active, either method can be approved even during a bank account freeze.
If declines rise, it’s usually because the authorisation pathway is being restricted (risk thresholds, merchant account review, or provider blocks), not because contactless itself is “turned off” by the bank freeze.
Refunds can become constrained if available balances are held, reserves increase, or permissions are restricted. Refund capability is often the pressure point that turns an operational restriction into a customer escalation problem.
Where refunds slow down, disputes can rise, which can then lead to further reserve increases or tighter provider controls – a feedback loop that can widen disruption beyond the original bank freeze.
They can, particularly where fulfilment is delayed, refunds are slow, or communication breaks down. Customers often use issuer-led dispute processes when they feel stuck.
Chargebacks are a card-scheme mechanism. For businesses, increased dispute volume can create additional fees, admin overhead, and higher risk scoring with providers.
Not automatically. Some restrictions are temporary, and providers may keep acceptance running while payout access is constrained.
However, if risk concerns escalate (for example, dispute volume spikes or verification issues remain unresolved), a provider may decide to pause acceptance or exit the relationship. That’s a provider decision layered on top of the bank account restriction.
A new bank account can change the payout destination only if the processor allows the change and completes any checks required to apply it. During restrictions, providers can also pause changes until reviews are complete.
Even if payout details are updated, a freeze scenario can still limit how quickly funds become usable, depending on what restrictions are in place and whether reserves or payout holds remain active.
“Terminal working” is a misleading diagnosis because the terminal is only the front end of a longer chain. In many freeze cases, the acceptance layer keeps functioning while the cash layer (payout access and refunds) becomes constrained.
The hidden mechanism is the feedback loop: payout delays lead to refund delays; refund delays lead to disputes; disputes lead to higher reserves and tighter controls. That loop is often what turns a short restriction into a wider trading disruption – even if the terminal itself never physically fails.