Obtaining a Merchant Account with Bad Credit

If you want to accept credit cards from your customers, you’ll be required to have a merchant account in place. Different merchant processors practice different criteria for approving merchant account applications. Your credit will be checked at the time you apply for a merchant account, but don’t fret as merchant processors are usually lenient with customers with bad credit.

Here’s what you need to consider when applying for a merchant account processor:

1.    Business Structure

It depends upon the type of business you’re setting up as to whether your bad credit will play any role in obtaining the high volume merchant accounts from your processor. A limited company will not reflect on the personal account of the business owner, whereas a company which has not been registered, will.

2.    Higher Fees

It is possible to obtain global merchant processing account even if you have a bad credit, but be prepared to pay higher cost for the fees charged. If your business ventures isn’t a limited company and you’re looking for online credit card processing services, it is advisable you prepare your financial credit score well in advance. Doing this will not only reduce the fees charged, but will also save money for your business.

3.    Bankrupt

Your bankruptcy details will reflect on your personal score for nearly ten years.  It will restrict many credit card processors from accepting your application, but there are merchant account providers who will willingly take your high risk business.

Credit Card Merchant Account vs. 3rd Party Processor

Business owners should be glad to know that by hiring the services of a third part credit card processor they will be able to accept transactions through credit cards. Merchant accounts are not easily obtainable for all businesses that need to process credit card payments.

Banks are reluctant as there are no signatures involved nor is the card present in such transactions. A third party processor is basically a merchant account cum payment gateway rolled into one.

Let’s read more about third party processors and credit card merchant accounts-

1. A Boon for New Businesses

Small businesses that are launching a new product in the market can avail the services of a third party credit card processor; usually, they are not sure if their product will do well in the market or not. A third party credit card processor will accept orders by credit on behalf of the business.

2. Select a Merchant Account or a Third Party Processor

If the sales volume of a business entity is less than $1000 a month and it has limited funds, then it should venture out with a third party credit card processor in the first stage. They might charge more than a merchant account but for a good reason.

3. Switch to A Credit Card Merchant Account As The Business Grows

Once the merchant feels that his business model is actually working, he can upgrade his business to a credit card merchant account. Some of these accounts also come with a shopping cart and don’t forget that time bound contracts are involved too.  

4. Things to Keep In Mind

Before deciding to go for a third party credit card processor, be very clear about the fees, the AVS costs and availability of additional fraud protection packages.

Tips On Minimizing Chances Of Card-Not-Present Fraud

If the card is visible to the merchant, he can inspect it for validity and can also ensure that the card holder is genuine. However, none of the regular checks can be performed for an online transaction. But there is no reason to be disappointed, a long list of best practices and tools for prevention of frauds can protect high risk merchant.

Follow the next steps, every time you need to verify the genuineness –

1. The Information of the Transaction and Phone Number Needs To Be Verified

The merchant should call the customer and verify details of the transaction before shipping out the goods. Most fraudsters will not be able to verify the information on the form as they use a credit line to order at random and seldom keep records.

2. Monitor Priority Shipping Orders

Highly priced shipments with a request for shipping on priority may turn out to be fraudulent orders. Since the criminal is not paying for it, he really wouldn’t care about the shipping costs.

3. Repeat Customers That Order Differently Need To Be Verified

Merchants recognize the buying patterns of repeat customers. If there is any deviation from the regular pattern, it needs to be verified by calling the customer directly.

4. Use the Address Verification Service

By using the AVS, a merchant can easily compare the address on the monthly statement with the one on the card issues records, before processing an order.

5. Card Security Code

When in doubt the merchant should call the customer and check about the three digit verification code at the back of the card. A customer who knows this code, will also have the possession of the card.