Merchant Accounts For High Risk Category Businesses

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In order to accept credit cards from your customers you need a merchant account.  This is generally not a difficult process to get set up.  However, for merchants in certain “high risk” business categories, it can be more difficult.  The solution is to find a bank that will give you an account in spite of your risky category.

The words “high risk” may bring to mind illegal or unsavory sorts of businesses, but that is not the case at all.  An illegal business is not going to be able to legitimately a credit card merchant account at all.  No, high risk businesses are businesses which historically have a high frequency of customer chargebacks and disputes.  The following is a list of the most common of these businesses:

• Travel (including vouchers, reservations and accommodations)
• Credit and debt collections and “credit repair”
• MLM  Mult-Level Marketing
• Electronics
• Timeshare and real estate advertising ventures
• Replics products
• Herbal supplements
• Financial consulting (tax advice or investing websites, e-newsletters)
• Phone calling cards & VOIP Service
• High tickets and high volume Jewelry, etc.
• Adult products and DVD’s, website memberships
• Telemarketing
• Escort services
• Dating merchants
• Tickets sporting events, theater, concerts
• Prepaid debit cards
• Foreign Canadian, Mexico, third world

None of the above business models are illegal.  But some of them do have a history of shady operators, so banks are more cautious in granting merchant privileges to them.

If your business is in one of these categories and/or you have been declined for a credit card merchant account, the solution is to work with an account executive who has the knowledge and experience to place you with a bank that will accept you.  Your first stop was probably at your own local bank where you have your business checking account.  But there are Merchant Service Providers (MSP) other than at your local bank, and they can help you.

Key information your account executive will need to be able to present to the bank includes your time in business (startups are a red flag!), your financial statements for the past year or two, if available, past several months of bank statements, previous merchant account statements if you ever did process with another bank, your current and projected monthly sales, average sale amount, high ticket amount and company debt picture.

Some banks will grant you a merchant account but will want to withhold payment on a certain percentage of credit card sales and hold that money as a “reserve fund” in case of a sudden large dollar amount chargeback or series of chargebacks.  In most cases the bank will eventually release those held funds, once you have been processing with them for a reasonable length of time adequate for them to develop confidence in your business.

If you operate in Mexico or other non-English speaking country you may be required to have an English language version of your web site and other sales materials.

Some MLM companies may be seen as “get rich quick” or pyramid schemes and therefore unable to get a merchant account.  If the MLM has a good business model and sells an actual tangible product (like vitamins or phone service), there is a good chance of approval.

IN telemarketing, outbound is worrisome and will depend on what the company sells.  Inbound telemarketing is usually fine, since the customer is calling in to the business to purchase.

It is really beyond the scope of this article to examine every possible high risk category fully.  Seek the advice of a seasoned Account Executive.

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Source by James Hussher