Do you need a high risk merchant account?
Selecting a merchant service provider for your high risk business is an important decision. It is very important to do a little homework on the merchant service provider you would like to use before submitting an application. Most merchants, high risk or not, don’t realize that by submitting multiple applications with many different credit card processors you are actually raising red flags associated with your business.
All merchant service providers (MSP), independent sales offices (ISO), member banks, credit unions, etc, use the same database to research businesses that are looking for credit card processing. If a number of applications for the same business name come into the system all at once, the application is typically rejected before it is even evaluated. Rejection is due to the fact that most underwriters will assume that the business has been shut down by a previous provider, can’t get a new account and are trying every provider possible. This is assumed regardless of the real situation.
What else can be done to increase the chances of an accepted high risk merchant account?
- Be honest about the nature of the products you sell and the services you provide. Full disclosure of your business is necessary to determine the best processor for your industry. Incorrect placement results in a declined account and all declined accounts end up in the master merchant database.
- Make sure that your business terms and conditions are clearly stated on your website check out page. Make sure your customers know what they are purchasing and what to expect if there is a re-bill.
- Offer more than one option for purchasing products and services. Give your customers the option to purchase everything up front in addition to a monthly re-bill.
- Maintain a cash reserve for the business. A large cash reserve demonstrates a healthy business and alleviates the sponsor bank's concerns about the potential for charge back liability.
- Keep your charge backs under 1%. If your charge back ratio (total amount charged back / total volume processed) exceeds 1% it will be very difficult, if not impossible, to get an approved merchant account. If you are able to get approved expect a large rolling reserve to be associated with the account.
- Include your customer service number as part of the line item description of your products on your customer’s credit card statement. This will help decrease chargebacks.
Regardless of your business type, selecting a merchant service provider that understands the high risk merchant account landscape increases your ability to get approved.