High Risk Merchant Accounts – Avoid These Pitfalls

Aug 28, 2012

This blog was written to help merchants avoid the common pitfalls of getting a high risk merchant account. Accepting credit card payments from customers is an essential part to most businesses in today’s economy. However, if your business is classified as “high risk” or if you have bad credit, getting a merchant account can be difficult.

1. Find out more about your business type.

There are many different classifications of high risk businesses when it comes to merchant services. You should research within your industry and find out if other businesses have gotten high risk accounts domestically (merchant account from a US bank) or if they are limited to offshore processing. The more knowledge you have about what options are available the better.

2. Try to get a domestic high risk merchant account.

A domestic merchant account means that the settlement bank, or the bank that is settling the funds into your account is based in the US. There are many advantages to a domestic merchant account over an offshore account, but the three main ones are:

1. Rates & Fees – domestic accounts are usually 2%-5% less than an offshore account

2. Funding Times – domestic accounts fund in 24-48 hours, whereas offshore accounts are 1-2 weeks

3. Gateway Integration – domestic accounts work with the most common Internet gateways including Authorize.net, eProcesssing Network, NMI and USAePay

3. Avoid expensive application and set up fees.

Most high risk merchant accounts have some sort of set up fee involved. Many high risk brokers and processors will charge exorbitant fees for setting up high risk merchant accounts. At eMerchantBroker.com you’ll never pay more than $99 for an account set up fee, which is always charged AFTER your account is approved and set up.

4. Make sure your business type is displayed clearly on the final bank contract.

Many brokers and merchant services sales people will say they “accept any business”. You may enter your business type on the application “collection agency” or “medical marijuana dispensary”, but the sales person will change the business type to “consulting” or “florist/flower shop”. This tactic may get your account approved quickly and for a lower rate, but in the long run you’ll end up kicking yourself. The bank will eventually find out what you’re really doing and your funds will be frozen and your account will be closed.

The best thing to do is to review the actual merchant services agreement, and not just the pre-application. You should always be able to review the merchant agreement prior to completing your account set up.

5. Choose a reputable broker with a good BBB rating.

There are hundreds of merchant services brokers to choose from, but there are only a few reputable, trust worthy ones in the high risk space. Be sure to check out their BBB rating. If they don’t have one, shop elsewhere. The BBB is a great forum for unhappy customers to voice their complaints and if a merchant services provider does not register with the BBB, it’s most likely because they have, or will have a large amount of consumer complaints. eMerchantBroker.com has an A rating with the BBB.

 


 

 

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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 on 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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