Payday loans are usually the last resort for consumers, and it takes a dedicated merchant to successfully operate a payday loan company. While consumers may keep you busy, many payday loan merchants have a tough time accepting plastic card payments. The government, banks, and processing industry turn up their noses at this lucrative industry, and because of this it is hard to find a payment processor.
There is no doubt that this is a risky industry. Many times consumers default on their loans, and too many defaulted loans look back on the merchant. With more and more Americans turning away from banks and traditional loans, payday loan percentages are expected to grow. With this growth brings an even higher chance of defaulted loans. This is something that cannot be helped many times, and it can unfairly cast a bad light on the merchant. To merchants, this may seem unavoidable, but there are ways that you can make sure that your payday loan customers are more likely to pay back their loans.
First off, do not loan more than the customer can afford. It is common practice to do so in many companies, and this hurts the customer and merchant in the end. Also, make sure that you practice good ethics when it comes to interest rates. Interest rates commonly top 300% of the original loan amount. By attempting to keep this rate low, you can better ensure that the loan will be paid back.
You also need to make sure that your payday loan merchant account is housed by a processor who understands the industry. While some claim to be for all “high risk” companies, they do not all understand the intricate workings and issues within the payday loan industry. While there are many things that merchants looks for when obtaining a merchant account, high risk merchant accounts must look for one that specializes in their specific industry. While a low processing rates are high on the “most wanted” list, sometimes this must be put on the backburner in order to find a knowledgeable processor.