applying for a merchant account

(or, “How to make sure you aren’t denied service”)

It’s really, really easy to apply for a merchant account.  If you type “payment processing,” “merchant account,” or any other string of words pertaining to the subject into Google, you’ll get a string of lovely ads, inviting you to explore different processing options.  Generally, you just enter some information into a nice-looking form and someone contacts you to walk you through their merchant account application.

What’s hard is what happens after the application!

After you complete your paperwork, you’re heavily scrutinized by a team of underwriters at your processor’s network – they consider your industry, your business background, and your credit score, among other things.  It’s very similar to applying for a credit card, actually.  If any one of those things looks a little amiss, the network will flat-out reject you and the merchant account provider who would have loved your business will simply shake its head at you.

I see lots of business owners online (in forums like Reddit, for example) bemoaning their experiences with processors who rejected them at first or after a period of time.  I sympathize with them because I feel there’s a lack of perfect information between business owners and payment processors regarding the industry – as in, the processors know what’s going on but aren’t telling the business owners how they can help themselves.  It’s all very cloak and dagger.  Of course, Google exists and everyone uses it to see what everyone else is saying about anything imaginable, so people find out what they need to know eventually – but, still, it’s not the best way to make a stressed business owner a little happier.

So, I’ve compiled just a few steps you can take to ensure your business is not rejected when you apply for a merchant account.  They aren’t necessarily quick fixes, but, if you really make an effort to follow them, you will have a much higher success rate (or, I should say a much lower failure rate).

b2b merchant account

Consideration 1: Your industry

I know what you’re thinking.  And, you’re right: It doesn’t make any sense to change your industry to cater to anyone, let alone a lowly old credit card processor.  What with your investment of time, sweat, and passion into your business, you’re obviously not going to lie down and die because one credit card processor tells you no to setting up a merchant account.  What you should do, though, is actively seek out processors who cater to your kind of business.  If you run an adult industry business, for example, seek out a provider that offers an adult merchant account.  Don’t even waste your time with processors that don’t overtly advertise that they cater to you, because if you do, there’s a good chance you’ll get rejected.  You wouldn’t order the escargot from Denny’s – even if they had it! – but, you would order it from a fine French restaurant.

Consideration 2: Your background in business

Whereas your industry is something you can’t (or won’t want to) change just to please a payment processor, your business history is something you can change.  This is something that’s been following you around since you opened your doors, so processors will look for trends and aberrations in your history.  Thankfully, there are things – like bankruptcy reports, for example – that you can have expunged from your credit report if you’ve taken care of them and paid off your outstanding debts.  You can contact the report providers (Experian, TransUnion, EquiFax) and let them know you’ve done your part and request that they remove the offending marks from your report.  For some businesses – not just high risk businesses – this alone can spell the difference between approval and disapproval for a merchant account.  Use this to your advantage if your business credit could be construed as shaky.

save money on a merchant account

Consideration 3: Your chargeback history

This is similar to business history, I suppose, but the number of chargebacks your business incurs can have a detrimental effect on your trustworthiness in the eyes of your processor of choice.  The idea is if your clients charge you back too many times, you’re a liability that affects everyone who isn’t the consumer – the business, the processor, and the processing network.  I’ve made a post before about how to manage chargebacks, but, in summary, you can:

Beef up your acceptance policies for card-present orders.

  • One very common reason for chargebacks is that customers don’t remember buying your products.  You can avoid simple situations like these by requiring customers to show ID with purchases, requiring them to verify a billing ZIP code.  These things help verify the card was in the hands of its rightful owner so it’s harder for that person to use the “But, it wasn’t me!” defense if they decide to file a chargeback against you.

Invest in EMV-reading technology.

  • As more and more folks start using EMV credit cards, EMV card readers will play a pivotal role in curtailing fraud, since the EMV chips included in those credit cards can communicate with the card readers themselves, and are much harder to duplicate than standard mag-stripe credit cards because of that level of sophistication.

Require more information for card-not-present orders.

  • Card fraud is rampant here because it’s so easy to simply read a name, card number, and expiration date over the phone.  Don’t settle for just those basic pieces of information.  Require a billing ZIP code and a CVV code for consumers.  For businesses, require a federal tax ID and other extra line item information – all this information is obviously hard to fake, so chargeback attempts will be less successful.  In addition, providing extra detail can get you lower costs if you’re a B2B credit card processing business.

So, look harder, clean up your reports, and hold your customers to a higher standard

These things aren’t terribly hard to do – it’s really just a matter of writing them down (or having someone else write them down for you, as the case may be) and checking them off your “merchant account considerations” list.  You’ll be much better off for it, and well on your way to securing a merchant account that’s cheaper, more reliable, and less fraught with stress than you’re used to.