Qualifying For A Merchant Account

Before giving you a merchant account, a merchant services provider will want to make sure that you are a legitimate business that will not leave them liable for fraudulent charges. They will start with a basic background check. This includes a thorough credit history review of the owners or officers listed on the application, in addition to credit references from two to three suppliers.

The most important question that providers want answered is whether your business is likely to have a high incidence of chargebacks. A chargeback is a reversal of a sale that was credited to your account, usually because of an error made by the cardholder's bank, a misunderstanding by the customer, or fraud.

For the most part, tangible products are considered to be much safer than services. Also, businesses that deliver purchased goods immediately in exchange for payment are viewed as being less risky candidates for merchant accounts.

Providers will also consider the type of credit card transactions that your company performs. As a general rule, card‐ present transactions that allow you to swipe the credit card and obtain a signature in person are considered to be much safer than card‐absent transactions that take place by phone, by mail or over the Internet. Being a higher‐risk merchant won't necessarily prevent you from getting a merchant account – but it can drive up your costs.

Finally, if you've had a merchant account in the past, providers will require previous statements to better gauge your charge and chargeback volume.

Some companies advertise high acceptance rates in an effort to impress, but don't be lured: 99% acceptance rates are a common gimmick and don't really mean much. Instead of focusing on the percentage, look for providers who help you address any deficiencies in your credit score or can show a history of working with businesses like yours.