Annual payment processing is one of the more difficult features to get approved when setting up a merchant account. The difficulty in getting this feature approved is due to the increased risk of liability for the processor. Risk of liability is increased for the processor based on the additional time the customer has to chargeback against the business.
With a typical merchant account, products and services are provided in full at the time that the credit card payment is collected. At that point the customer has up to 18 months to initiate a chargeback if the business does not fulfill their obligation to provide the product or service promised. In the situation of an annual payment the business is providing the product or service over an entire year. Therefore, the timeframe for initiating a chargeback is extended an additional 12 months for a total of 30 months of liability for the processor.
It is very important for a business looking to offer annual payment options to disclose this intent to the processor in the application process. Failing to disclose intent and proceeding with annual payment processing can result in a violation of the merchant account contract. Violating the merchant account contract will lead to the account being closed, the business entered on the terminated merchant file and funds for the business held by the processor.
Each business will be evaluated independently to determine if annual payment processing can be approved. Items that increase the odds of a successful approval include:
- Strong credit of the applicant(s)
- Strong business financials
- Strong business history
If you would like a consultation to determine if your business can be approved for annual payment processing please click on the link below and provide us with your contact information. A representative will be in touch shortly to begin the process.