Applying for a new account with a credit card processor can be a nerve-wracking experience, especially for first-time business owners. The approval process often seems opaque and arbitrary, and you may not have a lot of answers if your application gets denied. At 360 Payments, we have a different approach. This blog will explain some of the main reasons why processing applications get declined and what you can do about it.
It All Comes Down to Risk
First, some background. Why do you have to apply in order to get credit card processing services in the first place? In short, banks and processors assume risk when they agree to offer processing services to a business. If you can’t pay your bills or accept a fraudulent transaction, the processor is often on the hook for the funds to sort all that out. They want to make sure you’re an upstanding individual with a history of handling money responsibly before they work with you. So, what are some red flags that can cause credit card processors to brand you as “risky?” Let’s take a look.
There are certain business categories that are marked as high-risk right out of the gate. These include pawn shops, multi-level marketing companies, gun shops, and adult stores, just to name a few. If your business falls into one of these categories, you may have a harder time finding a merchant processor that’s willing to work with you. It may sound discriminatory, but the credit card processing industry has years and years of data to fall back on when evaluating a new business. Unfortunately, the sins of the many can outweigh the virtues of the few. (Note: this doesn’t mean you should despair of ever being able to accept credit cards. 360 Payments can help – get in touch with us.)
On the Naughty List
This one is a pretty obvious one – if you’ve had problems with a credit card processor in the past, you’re going to have a harder time finding others to work with you in the future. In particular, if a previous processor has ever terminated your account for fraud or other issues and then added your name to the Member Alert to Control High Risk Merchants, or MATCH, List, (previously known as the Terminated Merchant File or TMF), you’re going to have some trouble. To combat this, make sure any merchant accounts you close are in good standing and pay any outstanding balances before trying to get approved with a new provider. Just like your personal credit, your business’s credit reputation can be hard to rebuild if it’s tarnished.
Poor Personal Credit and Tax History
Your personal credit also plays a role in whether your business will get approved. If you know you’ve had credit issues in the past, it may be smart to have someone else serve as the signer for your business account, like a business partner or cofounder. If your business has no other officers or owners, do what you can to rebuild your credit before you apply to open a credit card processing account. Open tax liens (either business or personal) will also negatively affect your chances of approval. If possible, resolve those before applying as well.
Fishy Growth Numbers
Every merchant application you fill out will ask you for the sales volume you expect to process in credit card sales. It’s important that this number agrees with both your past volume as well as norms for your industry. Of course you want your business to grow, but be wary of setting too lofty a goal. This can be seen as potentially fraudulent and your application may be denied. If you’re a brand-new business with no past volume to draw on, research the average volume for your industry as you plan your estimate.
Get Help Understanding the Details
This blog is a great start, but we imagine you still have questions about the application process. That’s where our team comes in. Give us a call at 1-855-360-0360 or drop us a line on our website. We’d love to walk you through how the process works at 360 and get you started with your application. We’ll also help you better understand how the above factors may affect your approval status and work with you to find the best possible solution for your business.
PS – Speaking of credit, here’s how you can protect yourself in the aftermath of the Equifax breach.
PPS – If you’re already in a contract with a payment processor, no worries! You can still shop around.