How can you get a Merchant Account with No Reserve?

Sep 03, 2013

With the adventure of starting up a new business comes the challenge of setting up a merchant account which is a type of bank account that allows a merchant to accept card payments for their products and services, without which your business is most likely going to lose many of your card holding customers. The payments business is highly competitive and there is absolutely no shortage of processors who want your business acquiring banks and processors still need to do their due diligence before approving your application.

Broken down to its most basic core, a merchant account is a line of credit and each transaction processed for a merchant represents a measure of financial risk for the credit card processor. Because merchants often collect payments in advance of providing the product or service as well as providing a quality assurance, return or delivery guarantee, a merchant account provider is hit with all the chargebacks and losses when a merchant sells something they fail to deliver or deliver a product that is defective in some way.

In order to protect themselves from such losses, many processors insist on a reserve on your merchant account, that is predetermined at the time of applying for an account and is simply put in place to guarantee payments to the account provider and finally, the acquiring bank.  Much like an escrow account, a reserve allows the processing bank to establish a cash reserve estimated as a specified percentage of the expected monthly revenue from your card transactions, to cover losses from any chargebacks, uncollected fees and merchant fines if you’re  unable to remedy the situation within your own financial resources. Moreover, most start-up merchants don’t have a solid financial history and may have difficulty returning the funds to the cardholders in case of chargebacks so processors may impose a reserve on start-ups, in addition to requesting a personal guarantee. While the funds in the reserve still belong to you, they are inaccessible for the period of time during which they are held in reserve.

Certain businesses are considered to be of higher risk than others if they are often associated with an excessive amount of chargebacks, frauds, refunds, high loss ratios and a likelihood of disappearing overnight. Any business that has previously had their merchant account terminated or those that operate in a card-not-present environment and merchants that sell specific types of products or services such as dating services, diet/ weight loss programs, auction houses etc that are difficult to underwrite fall into the high risk category. Merchants that typically process large volumes or have large average transactions are also often considered high risk merchants and most traditional acquiring banks often demand reserves from high risk businesses.

So, how do you set up a merchant account with no reserve?

If you are having trouble setting up a merchant account with no reserve, it is highly recommended that you opt for third party credit card processing that enables you to accept credit card payments through a third party merchant. The third party credit card processor (also known as a free merchant account) is basically a payment gateway and a merchant account rolled into one, and it’s much less complex than setting up a merchant account. The free merchant account is set up and integrated into your business in such a way that whenever an interested client completes a transaction at the checkout, the details are processed through a gateway between the third party merchant processor (acting as any normal merchant) and the acquiring bank. The free merchant account then charges a basic transaction and commission fee that is subtracted from your final payout which is made once or twice a month, depending on the third party credit processor.

It is a win-win situation because businesses deprived of the benefit of having merchant accounts can still process cards and make profits while third party credit card processing is easily set up with no gateway fees and monthly fees. Also, these free merchant accounts support many types of debit and credit cards and send you instant and detailed statistical information (like full transaction details) so you are well informed of your sales.

Free merchant accounts are especially recommended to young and new businesses which lack solid financial backing and when your business starts growing steadily and performs a lot of high volume sales, will help you set up a merchant account for your company. In the case of high risk businesses, can also help you set up an offshore merchant account that does not demand high initials costs and enjoy fewer restrictions with lower costs and higher profits.


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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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