Having your merchant account application denied is a frustrating experience, especially when it comes to High Risk Businesses. With so many customers choosing to pay with a debit or credit card, not having a merchant account can put a huge dent in profits. Below, we outline a number of surprising reasons why your merchant account may be denied.
When applying for a merchant account it is standard procedure to ask for a personal credit history. This is used to determine your merchant account risk profile. Not everyone with bad credit is denied a merchant account. However, you should be prepared to pay a higher discount rate. This means that you will pay a little more in fees per transaction.
What Can I Do?
We recommend that you spend some time with your credit history to see if there are any quick or easy solutions to raising your credit score. It may be as simple as paying off a few small loans, or closing a few accounts to improve your score. As you improve your credit history, we can work with you to lower your transactions fees so you are no longer paying high risk prices.
If this is not possible than you might want to consider letting a business partner with a positive credit history fill out an application for the merchant account.
Lack of documentation
Many of our customers are not prepared for all the documentation required to set up a merchant account. Keep in mind that it is not just the merchant account provider looking for this information. The processing bank also requires a great deal of information to approve your merchant account. They will ask for paperwork in regards to the legal name of your business or corporation. They will need any type of contact detail available including your name, email, address and telephone number. They may also ask for a driver’s license, a passport, and/or a business license. The bank will also request that you hand over monthly processing statements or bank statements to analyze your risk potential.
What Can I Do?
We highly recommend that you walk through the application with your experienced SecureGlobalPay representative. We are trained to gather all of the information required by the processing bank.
Your High Risk Businesses is a High Risk Category
Many times a customer is surprised to find out they are denied a merchant account because their business is listed as “high risk”. A business is categorized as high-risk if their particular industry has a higher risk of chargeback tickets.
Why are chargebacks a big deal? A chargeback occurs when a customer contacts their bank to initiate a refund for a purchase they made on their credit card. The reasons why chargebacks arise can vary greatly but generally, they are the result of a customer being dissatisfied with their purchase. The chargeback process takes a lot of time and it costs everyone involved if the chargeback cannot be disputed.
Some high risk businesses include:
Adult Related eCommerce
Online eCigarettes and Vape
Online Firearms and Ammo
Online Tobacco Payment Services
Payday Loans (including Tribal)
Short Term Loans
Student Loan Assistance
Tech Support/Remote IT*
How To Businesses
Travel Packages/Tour Operators
Mail Order/Telephone Order
*expect a reserve
What to Do?
If your application is denied because your business is considered high risk, talk to a SecureGlobalPay customer representative to see if they can place you with an alternate banking and processing relationship. SecureGlobalPay has relationships with many banks and processors, some of which have an appetite for businesses who qualify for a higher risk merchant category. They uniquely specialize in high risk business types.
Processing Volume vs. Industry Volume
We always recommend when filling out an application that you are as honest as possible. We’ve had incidences where a customer tried to get the best pricing possible by overestimating their monthly volume.
When your application is being considered, the bank will compare your processing volume to the average processing volume within your High Risk Businesses industry. If you overestimate your business processing volume, then it is possible that your application will be tagged. This process is in place to discourage those attempting to open a fraudulent account.
That doesn’t mean that you can’t process more than your industry volume average. However, it does mean that you will need to be prepared to prove that you will legitimately be processing at a volume higher than industry average.
What to Do?
Be honest when filling out your application for High Risk Businesses. It is within your best interest. If you are aware that your processing volume will be higher than your industry processing average, make sure it is noted by your SecureGlobalPay merchant account representative during the application process.
Multiple Bad BBB or “Rip-off” Reports
BBB is well known within the business industry as being very adept at handling disputes between customers and businesses. If you receive a complaint about your business, they will notify you and work with you to help resolve the complaint.
If you have a number of complaints with the BBB or a number of complaints with any type of “rip-off” reporting business, then you are at higher risk of having your merchant account rejected. A high number of reports makes your business look fraudulent.
What to Do?
We recommend that you do whatever it takes to peacefully resolve the disputes through the reporting agency. A bank wants to see that you are actively working to make sure any and all customer complaints are being responsibly handled. Responding to these situations can show that you are a legitimate business, working to address your customer’s concerns.
What Do I Need to Sign Up?
Many merchant account providers need as much information as possible to get you the best merchant account for high-risk ecommerce pricing possible. Based on your history and income they can offer a variety of pricing options that will work best for your business. Some of the documentation you may be asked for:
Most recent credit card processing statements
Most recent tax returns
Most recent financial statements
Most recent bank statements
Information about How Your Business is Set Up (DBA, Partnership, Corporation)
IRS Confirmation of Non Profit Status — 501(c)(3) status
If your merchant account application for High Risk Businesses is denied, that doesn’t mean you are without options. Your first call should be to a SecureGlobalPay customer service representative. We have the experience you need to navigate the application process. We will work to find a customized solution for you.
Please keep in mind that if you are currently shopping and pricing for the best rates and fees possible for you High Risk Businesses, call us first! All we need is a copy of your 2 most recent credit card processing statements from your current merchant service provider or an honest conversation about your business model and future goals for growth. Contact us today!