Closed Bank Accounts And Cancelled Credit Lines – A Big Problem For Merchants

Apr 26, 2016

Operation Choke Point has negatively impacted a number of small-business owners. They have their bank accounts closed and credit lines cancelled.

Shutting Down Merchant Accounts

Operation Choke Point is an initiative by the US Department of Justice, which was announced in 2013. It aims to investigate US banks and the business they are running with payday lenders, payment processors, and other companies considered high risk.

Many small-business owners state their bank accounts have been closed and credit lines cancelled. They claim to have been running completely legal and legitimate businesses. Owners of gun shops and tobacco stores have provided testimony to Congress.

In 2014, businesses dealing with escort services, drug paraphernalia and pornography were also labeled as high risk by the Federal Deposit Insurance Corporation (FDIC). Based on the original list of high-risk businesses, many banks shut down the accounts of business owners who hadn’t done anything illegal.

According to the FDIC, the unintended consequence of closing legitimate small-business operations was caused by a misunderstanding of the FDIC’s high-risk list from the part of several banks. In January 2016, the FDIC required all banks to review customers on a case-by-case basis instead of just blocking banking services for certain types of businesses. The victimized small-business owners weren’t satisfied by the remark.

Could Bitcoin Save the Situation?

With this in mind, small-business owners should choose their payment processor with exceptional attention. Highly reputable merchant account providers like emerchantbroker.com offer the best for high-risk businesses. EMB, #1 high-risk processor in the US, is an ideal company to apply for services concerning high risk credit cards.

Some people believe Bitcoin can be the right solution to the situation. In fact, business owners aren’t willing to hold Bitcoin after a sale, and a bank account is required for using a service to instantly convert Bitcoin to dollars at the POS. On the other hand, the number of consumers holding Bitcoin isn’t large enough. So, accepting cash in a situation like this would more preferable, though that may cause a new risk of where that cash is going to be stored.

Others think using Bitcoin for peer-to-peer lending could help those small-business owners whose lines of credit had been cut off. However, it’s doubtful if such a specific case is enough to deal with actual business loans in this situation. Bitcoin could be a way out in the future. Today, it feels like the technology isn’t ready enough to help cope with a situation of this type.

The problem lies in the fact that funds can be seized and transactions can be banned by governments and banks at any given time.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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