In a nutshell, the answer is yes, you can get a merchant account despite having bad credit. In fact, there are bad credit merchant account providers designed for just this issue. Of course, as with any industry, there are best-in-class high-risk merchant account processors, and other businesses you would do best to avoid.
Let’s take a look at how to get a merchant account with bad credit and what you should look for when choosing credit card processing services.
If you and your business are new to the world of credit card processing, you may not have heard the term high risk in relation to credit merchant services. In essence, a high-risk merchant is one that credit card companies and banks have deemed prone to fraud and chargebacks.
Several companies fall under this category just because of the industry they are in. eCommerce businesses, CBD, and travel companies are just a few. Companies and individuals with poor credit fall under this umbrella, too.
The good news is, getting a merchant account with bad credit is possible, and an even better one is that there are highly qualified and reputable high-risk service providers that offer bad credit merchant accounts.
Let’s see what a credit score has to do with all of this, and why bad credit puts you in a high-risk category.
You would think that your credit score would have little to do with credit card processing. As a business owner, you are, after all, only accepting a payment, not making one.
The key lies in credit card processing and how a transaction works as the payment circulates through the system.
A customer purchases an item and makes a credit card payment. The credit card details are sent to the acquiring processor or bank. This information is then forwarded to the credit card network.
The credit card network requests authorization from the issuing bank. If authorized, a hold for that amount is placed on the cardholder’s account. You, the merchant, batch out at the end of the day, and the money arrives in your bank a few days later.
Only this money isn’t really the customers. For now, until they make the credit card payment, it’s the banks. If a chargeback occurs, it’s then up to you to pay the bank.
For this reason, and to ensure you’re fiscally responsible, both your business and personal credit history are reviewed before getting a merchant account.
The direct answer is no, you cannot get a merchant account without a merchant services company running a credit report.
The good news is that bad credit does not have to be an impassable barrier that keeps you from accepting credit and debit cards, and operating a successful, growing business.
If a merchant account provider claims they are offering a bad credit merchant account instant approval, it may be best to continue your search for a qualified credit card processor.
While some companies, such as High Risk Pay, can give you an answer in as little as 24 hours, it takes time to do due diligence when processing an application.
If a credit card processor approves you for merchant accounts right away, it’s best to continue your search. You will likely find the bad credit merchant account comes with extremely high fees and additional restrictions.
Some third-party processors do not require credit checks. These include PayPal, Square, and Stripe. Keep in mind that these payment solutions companies are not high-risk merchant account providers and are quick to close your account should an increasing percentage of chargebacks occur or if they decide, down the road, that you are high risk.
When this occurs, they can unexpectedly close or freeze the account and tie up funds for up to six months.
The specifics regarding a bad credit merchant account vary according to the bad credit merchant account providers. Some will request a reserve balance that is kept to cover chargebacks or fees.
Other merchant account providers charge additional fees that fall on the high side. These may include setup, capture, and processing fees.
A contract with a bad credit merchant account provider may also include penalty fees for disputed transactions, longer terms, and penalties for early termination.
While this information may seem like bad news for a business with bad credit, all is not lost. Business owners can often find agreeable terms if they take the time to find an experienced, honest high-risk credit merchant account payment processor.
Like all aspects of business and life, change is certain. You, as a business owner, can get a merchant account with poor credit and you can work at making your bad credit good. Don’t let your credit scores define you.
If you’re just starting out in business, maintaining good standing with your existing merchant account provider lets future banking partners know that you’re creating long term solutions.
Almost everyone goes through hard financial times at some point in their life. It’s what you do when the chips are down that defines your strengths.
When getting a merchant account with bad credit, it’s best to look for credit card processors that have experience with those that fall into the high-risk merchant category.
At High Risk Pay, bad credit isn’t a problem. We have decades of experience helping business owners with low credit obtain their first merchant account.
We are willing to work with you and your business, in fact, we believe almost everyone deserves a chance. This is one of the reasons we have a 95% approval rate for bad credit merchant accounts.
As we mentioned, some payment processing solutions charge high fees as a way to offset risks, while others force merchants to sign long multi-year contracts. We engage in none of these practices.
We’re here to help you build your personal and business credit back up and provide you with the merchant services that will help your business thrive.
To find out what we can do for you and your business, contact us at High Risk Pay today!