Improve Your Chances For a High-Risk Merchant Account in 5 Steps

Wednesday, February 19th, 2020

Many times, failing to plan is planning to fail. And a rejected merchant account application is one of those instances when failure to strategize can lead to disappointment.

The truth is; acquiring an operational merchant account is an easy process, BUT ONLY if you know what you want. It is also true that no account-request is guaranteed for bank approval, but proper preparation can perk up your chances.

The seat is hotter for firms classified as high-risk because underwriters are unwilling to onboard them.

Merchant Account Explained

If you do business that takes credit and debit card payments, then you’ll need a merchant account. This account acts as a temporary storage place for the money you collect from sales— before transferring the amount to your business bank account. Money transfer can happen per-day or per-week, as dictated by the binding contract.

Some service providers offer high-risk accounts to risky business. Others use a mother merchant account to process payments for a group of retailers, consequently protecting them from losses due to chargebacks—or reverse charges demanded by unsatisfied customers.

Chargebacks are major concerns in processing card payments; no wonder banks avoid business with high reverse-charge levels.

So how can you increase your chances of qualifying?

• Familiarize with the basics

Understand everything about merchant account types, and focus on offers explicitly built for your industry. Search for the best service providers for you if you are high-risk. Check for any local vendor before you search further.

• Be Honest About Your Credit Status

Banks do a background check on their customers, and credit bureaus have all the info underwriters need, so it’s unwise lie about your credit status.

A better approach is to set straight all your business debts and work with Credit Bureaus to eliminate any errors in your report.

• Gather all the credentials

Learn what documents you need to apply for an account with your specific provider, and put everything in order before you embark on application. Prepare data and reports on, Count of Refunds, Transaction volumes, and Chargeback rates.

You may also need six months of business bank statements, as well as other documents to prove that you’re indeed in business.

• Be ready for custom-made terms and conditions

When applying for a high-risk merchant account, be prepared for tailor-made terms and conditions. For example, high-risks pay a higher processing fee than low-risks.

In some instances, your seemingly low-risk venture may carry hidden risks that your lender is not willing to ignore. The result could be special terms and conditions which both parties must agree with and ratify.

• Scrutinize Fees

Merchant account service providers charge different fees that retailers must understand before they enter a contract. Learn more about the fees like Monthly minimum fees, Reserve fees, Chargeback fees, Transaction fees, and Equipment-installation fee. And then look into each type of fee before partnering with an account provider.

Wrap it Up with a Catchy Cover Later 

This last step can be the icing on the cake if you do every other thing right. Ensure you explain to your underwriter why your business is a calculated risk for them.