Get a Card Processing Merchant Account with Bad Credit

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing | 0 comments

Bad CreditGiven the recent economic conditions many consumers and business owners have seen their credit scores lowered for many various reasons. A poor credit profile can definitely impact the ability to obtain a small business loan and can have an impact on getting approved for a merchant account.

This largely depends on the merchant services provider however can also depend on the type of business and other factors such as…

  1. Timing of card charge in relation to good/service delivery
  2. Business owner bankruptcy history
  3. Applicant’s merchant account history

Most large credit card processing companies are more concerned with the risk nature of the business than they are about the business owners credit profile, however the credit score is considered because a merchant account is in essence a micro loan to the merchant account holder. This is because the processor and related banks deposit funds in a merchant account holder’s account before the card holder pays the balance; this represents a risk to the processor and banks thus a fee is charged.

There is also the risk to the processor that the merchant will take payments for goods and then not deliver on these goods resulting in a card holder chargeback. Because of the combination of risks involved the applicant’s credit score is considered in the account application process. However a much larger factor is the type of business.

Low fraud risk businesses such as retail establishments and restaurants present a low chargeback frequency and thus owners with bad credit typically do not have an issue getting an account. With MOTO and internet merchants provide a higher risk and thus are taken on a case by case basis.

Wholesale ISOs and other independent sales organizations typically have problems approving merchants with bad credit because they are large enough to take the risk of the account but not large enough to be able to absorb it. Sometimes however there are bad credit specific sales organizations that typically hedge the risk by charging higher fees and holding back funds. If you are a merchant with bad credit looking to apply ensure that you are working with a large organization, who can offer low rates while still supporting your account.

Leave a Reply

Your email address will not be published. Required fields are marked *