Credit and debit card payments used to be a luxury back in the day. In the recent years, card payments became a necessity to most businesses with online platforms. To enable this in your commerce, you would need a merchant account to process funds. Merchant accounts can be difficult at times to obtain, creating a demand for instant approval merchant account services. Merchants operating in the higher risk industries have been significantly affected when searching for high risk merchant account instant approval processors.
What is a High Risk Merchant Account Instant Approval?
It is a given fact that high risk merchant accounts take longer to set up, as opposed to the typical businesses. The latter only takes a day or two to open an account, while high-risk trades can reach up to five weeks at most. Why is this so?
High risk merchants take a more expansive search into your capacity of sustaining the reserve amount required for your account. Payment processors will look into your personal credit history, as well as the banking history of your business. More requirements are needed to be presented, and these might go through more departments and scrutiny than usual. These papers alone take several days to be reviewed. Then what do providers mean when they say, “guaranteed instant merchant account approval?”
When you see credit processors stating “instant merchant account approval”, this comes with a fine print notice. “Instant” means a full day or two, which is significantly quicker than the usual process. Most of the account providers follow a two-step approval.
1. The high risk merchant account provider initially approves your account
2. The payment processor (private corporation or banks) give the final approval of your account.
What you need to look out for is getting locked in a long term contract while you are still on the first step and with zero guarantees of getting an approval on the second process. You can be subjected to an Early Termination Fee (ETF), should you decide to end your contract prior to the agreed date.
Many account providers who pre-approve accounts do not do a credit check which may potentially be quicker, but can only put you at risk with processors. Make sure that your merchant account provider can get you access to payment processors who specialize in high risk accounts. The last thing you want is for your processor to close your account permanently.
What Can Delay Your Account Approval?
Generally, merchant accounts take a few weeks to complete the approval process, but some businesses might be subjected to rejection. This can happen to you too if you happen to tick off the following factors:
Bad Credit – more often than not, bad credit reduces the chance of businesses to get a bank approval. This also applies if you have been previously tagged as a Terminated Merchant. What you can do is clear this out with your credit score agency. Have your previous negative credit stricken off your record by presenting supplementary documents that show you have settled your accounts, such as a certificate of clearance.
High Risk Business - if you happen to have high chargeback rates with your previous processors, you are most likely to be considered as a high risk business. This is a big red flag to banks and other processors. High chargeback rates tend to bringing in more loss rather than profit, and banks avoid taking those risks, for good reason. However, some banks may still grant you a merchant account, with a security deposit imposed.
The top industries considered as high risk:
- Online Commerce
- Online Pharmacy
- CBD Business
- Online Gaming
- Adult-Related Trade
E-Commerce with Large Transactions - not all banks happen to favor large payment processing especially for online businesses. The volume and amount of your transaction is highly considered by processors.
International Merchant – being an international merchant can also be a factor for rejection, especially if you are at risk of having high chargeback rates. Trading products or services which may fall under the gray area in major countries can also be a challenge when trying to get a merchant account.
From the facts above, it can be seen how important it really is to keep your chargeback ratio at the lowest rate possible. The easiest way to calculate your current chargeback rate, is to use this formula:
Number of transactions (chargeback) ÷ Number of Monthly Transactions. The ideal chargeback ratio is below 2%.
Increase Your Chance for Approval
Instead of falling for claims of instant approval, what you can do is to boost your chances of getting approved. There are several factors that you can meet to increase your chances of getting an online high risk merchant account instant approval.
Prepare All Your Documents – present all necessary information that your processor may need for your account. Have a scanned and physical copy of your documents, including your business’ bank statements of account for the past three to six months. These are some of the documents you might need to submit:
- Business Model
- Valid Identification
- Supplier Contract (if you are a retailer)
- Business Banking Statements
- Personal Banking Statements
- Screenshot of E-Commerce Site
High Credit Score – the higher your credit score, the higher your chances of getting approved. Make sure your payouts are timely to retain a good credit standing.
Issuing Bank – it is ideal that your bank has a history of processing transactions from your industry. This may be a bit of a challenge for high risk businesses, but it is always worth asking the bank if they are able to give you a chance.
Sufficient Current Bank Savings – processors are more inclined to approve accounts if the amount in your bank account indicates that you have enough funding for your business.
Functional E-Commerce Website – given that your nature of business transaction operates through your site, processors need to see that your platform is functional. There are a lot of instances when customers file chargeback claims that resulted from errors in websites.
Reliable Payment Processor with Guaranteed Merchant Account Approval
At the end of the day, what you need is a reliable merchant account provider with low rates and fees rather than a provider who offers instant no credit check merchant accounts. While it is very tempting to get a high risk merchant account instant approval with no credit check, it is still worthwhile to follow through the longer process. Contact Allied Payments today and get started.