Payday Loan Merchant Account: What You Need To Know

Oct 25, 2022

Monthly calendar with circled payday loan date.

If you run a payday loan business, a payday loan merchant account is essential. The account will enable you to bill and accept payments from clients.  

When shopping for a payday loan merchant account for your business,  it is important to consider payment processors with products tailored for high-risk businesses.  

What Is A Payday Loan Merchant Account?

If you’re in the short-term lending business, you need a payday loan merchant account for your company. The account allows payday loan merchants to process high-risk payments such as credit and debit card billing. It helps you bill issued loans and process payments from clients.

With a payday loan merchant account, you can set a schedule for your clients to automatically pay agreed-upon amounts. At EMB, our experts are experienced in providing the most secure and compliant payday loan processing solutions.

Why Are Payday Loan Merchant Accounts Classified As High-Risk?

Irrespective of your company’s track record, payday loan merchant accounts are considered high-risk. This is because payday loan merchants:

  •         Record a high number of chargebacks.
  •         Operate in a highly regulated industry with stringent underwriting regulations.
  •         Post the highest number of fraud cases.

Due to the excessive chargebacks and fraud cases, banks consider payday loan lenders high-risk ventures. This can easily frustrate the success, stability, and growth of your business. As such, it is important to find a reputable merchant account provider for your business.

Who Needs A Payday Loan Merchant Account?

Payday loan merchants offer short-term credit to millions of American households with cash flow issues. The industry caters to the needs of individuals who aren’t served by mainstream banking institutions. In recent years, it has offered more than $38 billion indicating significant growth.

For underserved populations, payday loans are the go-to option when faced with financial challenges. These loans allow clients to access immediate funds for their pressing financial needs. As such, payday loans are an excellent option for high-risk individuals in dire need of cash.

Considering the target market, the risks associated with payday loans are significant. For customers without a stable income, the high-interest rates and limited finances could make repayment impossible. This poses the risk of fraud and chargebacks for your merchant business.

If you’re a high-risk merchant, therefore, you need a payday loan merchant account. The account must be tailored to your specific needs. It should allow you to increase your customer base, process card payments, prevent fraud, and help you avoid risky chargebacks.

Do You Need A Payday Loan Merchant Account?

Alt text: Payday loan merchant account holder issuing cash advance.

Every banking institution or payment processor has a unique way of calculating risk. In addition to your bank’s underwriting regulations, your level of risk will be determined by cases of fraud and chargebacks. The higher the number, the higher the level of risk.

You need a payday loan merchant account if you run the following businesses:

  •         Short-term lending
  •         Payday lending
  •         Brick-and-mortar consumer lending
  •         Cash advance merchant business

You also need a payday loan merchant account if you want to expand your customer base. The account will allow customers from different parts of the country to access your payday loan services. Talk to us today if you need a high-risk adult merchant account for your business.

What Are The Benefits Of A Payday Loan Merchant Account?

A high-risk payday loan merchant account will benefit your business. Among others, the benefits include:

1.      Protection from chargebacks

Payday merchant account providers offer advanced protection from chargebacks. Their advanced security features will guarantee a chargeback of under 2%. This is significant as your merchant account will not be at risk of termination.

2.      Prevention of fraud

As a payday merchant, you face the risk of fraudulent transactions. A payment processor with a high level of payment security can help you deter fraud. At EMB, our advanced processing solutions will help detect and prevent fraud.

3.      Data protection

The utilization of advanced technology solutions will help protect your customer’s data. As such, with a payday loan merchant account, the debit and credit card data of your customers will be secured.

4.      Business Growth

Merchant accounts accept payments from different currencies. This will allow you to offer payday loan services in many markets, hence an increased customer base and profits.

5.      Business Stability

With a payday loan merchant account, your credit record will not be a problem when processing transactions. Your merchant account reserve will act as a reserve account for chargebacks and prevent account termination. 

6.      Increased Profits

As mentioned, a payday merchant account will stabilize your business, increase your customer base, and protect you from chargebacks and fraud. All these benefits will lead to a significant increase in your profits and overall business performance.

What Are The Drawbacks Of Payday Loan Merchant Accounts?

Despite the many merits, payday loan merchant accounts have their limitations. These limitations include:

1.      Fees

Payday loan merchant account providers charge fees for processing transactions. Compared to other payment platforms, the fees can be considered high by clients.

2.      Mandatory reserve account

Depending on your preferred provider, a merchant account reserve can be mandatory. With a monthly volume of approximately 50%, this can limit your business operations.

3.      Merchant Account Termination

On accumulation of excessive chargebacks and fraud cases, your payday loan merchant account can be terminated. Furthermore, a rolling reserve of 6 months can lead to account closure.

How To Get Approved For A Payday Loan Merchant Account

Alt text: Loan agreement between a payday loan merchant and a client.

Banks and aggregate payment processors avoid high-risk businesses like payday loan merchants. As such, even if your initial application will be accepted, the stringent regulations and underwriting process will lead to the decline of your application and termination of the account.

To get approval for your business, therefore, you’ll need an established and experienced processor like EMB. Such a processing company will help you get approved for credit card processing and guarantee your business growth.

Once you apply for approval with a merchant account provider, the provider will:

  •         Assess your business to establish if your operations are legal.
  •         Take you through their application process.
  •         Accept and review your application according to their underwriting guidelines.
  •         Approve your application.

Once you’re approved, you can start processing payments. To reap maximum benefits, you must find a provider that understands your exact needs. The payment processor must protect you from chargebacks, offer discounted rates, and help you limit fraudulent transactions.  

What You Need When Applying For A Payday Loan Merchant Account

When applying for a payday loan merchant account, you must provide some crucial information. Among others, the requirements include:

1.      Documentation

High-risk payment processors will accept your application if you provide the necessary credentials. Among other pre-set requirements, most merchant account providers will ask for:

  •         A valid identifying document such as an ID, passport, or driver’s license.
  •         A chargeback ratio under 2%.
  •         A bank letter or voided bank check.
  •         Your Social Security Number (SSN) or Employer Identification Number (EIN).
  •         Recent bank statements (usually for the past 3 months).
  •         History of credit card processing (usually for the past 3 months).

2.      A good credit score

Most merchant account providers prefer applicants with a solid credit score. This is because a good credit score indicates a good repayment record. Even so, there are high-risk merchant account providers who can approve you with a poor credit score.

3.      Tax Compliance

For easy approval, make sure that all your tax obligations are fulfilled. Payday loan merchant account providers prefer merchants with a solid tax record.

4.      A good credit card processing history

Whether applying for your first merchant account or the second, you must show your credit card processing history. A good history will simplify the approval process.

5.      PCI Compliance

Other than having a PCI-compliant website with advanced security tools, for approval, you must meet all the requirements of the Payment Card Industry Security Standards Council (PCI SSC). This will help protect your customers and business from chargebacks and fraud.

Who Can Help With Your Payday Loan Merchant Account Application?

Alt text: A payment processor guiding a payday loan merchant.

Even if many merchant account providers exist in the market, not all can understand your specific needs. Therefore, if you need help with your payday loan merchant account, you must shop around to discover reputable providers.

Prefer a merchant account provider with proven, secure, and compliant solutions. Such a provider understands your exact needs and has established long-standing relationships with banks. This will help simplify the payday loan merchant account application and approval process.

Why You Should Partner With EMB

Even if banks, other payment processors, and acquirers consider payday loan merchant accounts high-risk, the payment experts at EMB will help get you approved. With EMB, you’re guaranteed fair pricing, top-quality services, 24/7 support, and a great customer experience.


Even if your payday loan business is classified as high-risk, when applying for a payday loan merchant account, don’t limit your options. Opt for a merchant account provider that understands your needs, offers discounts, and has a proven service history. EMB checks all these boxes. Sign up or give us a call today.


Let us help you get a high risk merchant account today!

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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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