Merchant Account Denied
Do not worry, this happens from time to time, but not all is lost. If your application for a merchant account got denied, it is probably because your merchant service provider has tougher underwriting standards than others. There are plenty of “high risk” merchant service providers like Charge.com who offer merchants like you an opportunity to still obtain a real merchant service account. Obtaining a “high risk” merchant account is much like obtaining a normal merchant account, however, there may be restrictions on how much volume you can process and a reserve fund may be created holding back a percentage of each sale to cover any potential chargebacks. After a while, though, if your merchant account is in good standing and you minimize the number of chargebacks, you likely can eventually forgo the need of maintaining a reserve account. There are numerous reasons for a denied merchant account; some of these are listed below in more detail:
Bad Credit – This is by far the most common reason for a denial; however, there are merchant service providers out there like Charge.com that work with high risk applicants.
New Companies – A brand new company newly formed is a much higher risk than an established company looking to change providers.
Type of Industry – The type of industry you are in can also bring up a red flag. For instance, industries where there has been a history of abuse by other people can make it hard to obtain a merchant service account. Types of industries typically having a hard time getting approval are listed below:
- Pornographic websites
- Guns and ammunition
- Online gambling
- Free + shipping type offers
- Multi-level marketing companies
- Affiliate marketing companies
- Group buying websites
- Penny auction websites
- Discount memberships
- Gym memberships
- Membership clubs
- Recurring billing products
- Nutritional supplements
Expected Transaction Volume – If you apply for a merchant account and indicate you need a high level of processing volume, your chances for obtaining a merchant account will greatly diminish. The more volume you do, the more likely you will face many chargebacks and the more risk you will pose to the merchant services provider. Only apply for processing volume based on your expected volume, be conservative, and only ask for the minimum you need. If your volume picks up, you can always apply for more volume later. Build trust with your merchant services provider and you will eventually get to the point where you can have unlimited processing volume.
Average Ticket Size – On the typical application, the merchant services provider will want to know what your average ticket size will be. If you indicate an extremely high average ticket price, the chances of approval will be greatly diminished. The larger transaction size means the higher cost if there is a chargeback and more risk the bank and merchant service provider must take.
Expected Transaction Volume – If you apply for a merchant account and indicate you need a high level of processing volume, your chances for obtaining a merchant account will greatly diminish. The more volume you do, the more likely you will obtain chargebacks and the more risk you pose to the merchant services provider. Only apply for processing volume based on your expected volume, be conservative, and only ask for the minimum you need. If your volume picks up, you can always apply for more volume later. Build trust with your merchant services provider and you can eventually get to the point where you can have virtually unlimited processing volume.
If you recently got denied a merchant account, call Charge.com today to speak to one of our merchant service account representatives who specialize in “high risk” merchant accounts, today. You can also get started by filling out the form to the right.
