Are You High Risk?
Just because some merchant account providers lump e-businesses in with other high-risk businesses, like telemarketers, merchants in the travel and cruise industries and internet auctions, it doesn't have to mean you won't be able to open a merchant account. It does mean, though, that it may be more challenging to set one up. Merchant account providers--banks and independent sales organizations--will also consider how long you've been in business, your credit history and any previous merchant accounts you've held with other processors.
Your length of time in business matters because merchant account providers want an assurance that you understand the business environment in which you operate, can identify the potential risks you face, know how to prevent or reduce fraud, and understand how to manage credit card acceptance. Regardless of risk, this kind of knowledge comes only with first-hand business experience.
Your credit report will show how well you've repaid past loans, and if you've had any liens, judgments or bankruptcies filed against you. A favorable credit history will go a long way toward establishing your credibility as a prospective merchant.
And if you've had an earlier, well-maintained merchant account, it's a positive indicator of how you're going to deal with your new processor. Terminated merchant accounts will show up on the Member Alert to Control High-Risk Merchants file, also known as the Combined Terminated Merchant File. If your previous processor terminated your merchant account because you defaulted on it, or if you incurred too many chargebacks, this may negatively impact opening a future account.
To increase your merchant account eligibility, follow these tips:
- Ensure a positive credit rating. Remove any past bankruptcies, late payments or liens from your credit report before you apply for a merchant account. To obtain your credit report, contact a credit reporting bureau such as TRW or a company that provides merged credit reports from major reporting agencies, such as Equifax, Experian or Trans Union. Write to them, explain that these matters have been cleared up and ask that they're removed from your credit report. Whether you own a small or large business, having a good credit rating will make a lasting and favorable impression with a transaction processor.
- Be honest about previous merchant accounts, bankruptcies, liens or judgments. By acknowledging past financial challenges, you improve your credibility and may encounter one less barrier to opening a new merchant account. You cannot hide information that's part of the public record.
- Be willing to pay higher fees or accommodate special account requirements. If you need to abide by special restrictions or pay slightly higher fees in order to open a merchant account, by all means do it! It's worth it to provide your customers with as many noncash payment options as possible. It will help you generate revenues and stimulate impulse purchases.