Merchant Account Considered High Risk
Many financial institutions are tightening up guidelines and raising fees. These days even acquiring banks are cracking down on various business types. No company wants to take on a possible financial loss. There are merchant services providers out there that specialize in high risk business, but you have to be prepared to provide all the information that is requested.
Merchants may be required to provide the following:
- Two years of tax returns for the guarantor
- Six months of processing statements. If you have not processed before, you will be required to provide six months of bank statements
- If you are an internet-based account, you will need to make sure you have a clearly visible return policy
- It helps to have a tangible product – I once had a loan restructuring company create a package with a welcome letter and question kit to send to all his customers once they purchased his services.
There is always a way to get a merchant account for any business type. Some business types such as Adult, MLM, Telecommunications, Escort Services, Internet startup companies and Travel may require higher rates, and in some cases a reserve account. The amount you may be required to put in a reserve account varies, based on your volume and business type. Most merchant services providers typically are looking to protect themselves against chargebacks. A consumer can dispute a charge for up to 180 days after the purchase, so processors create reserve accounts in case a chargeback does occur. In my experience, banks like your chargeback ratio to remain under 1%. Otherwise, merchants can be fined and have their merchant account turned off.
There are always offshore options. Offshore processing may be the only option for some business owners and can be costly with rates as high as 10%. Typically, merchants have to pay wire transfer fees as well as high transaction fees. To learn more about these and other options, contact your merchant services provider.
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