Bad Credit Merchant Accounts

How to get a merchant account with bad credit… and make it look easy.

Experian estimates that 30% of Americans have poor or bad credit, according to the company’s 2015 Vantage Score 3.0 data. Furthermore, people with scores between 300 and 600 are most likely denied access to good lending opportunities due to their low score status. 

This isn’t just a struggle for someone new on their own but also for those whose economic downturn has hit in recent years.  

The majority of people don’t have excellent credit, but there are still some who do. On the other end of the credit world, only 22% of people have an “excellent” or a super prime score between 781 and 850 according to data from Experian – scores that fall in either category would be considered traditionally excellent by financial experts. 

The rest falls somewhere on this scale while being placed into one group or another, depending on their FICO’s number ranking at any given time.

bad credit merchant account: get approved!

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Bankcard was referred to me by my developer. From the jump, they were impressive. They were super responsive, they asked great questions and their solution was really robust. Also, working with Katherine and Hanna is a dream!
High risk merchant account
Emily Wallace

Bad credit merchant account


Experian estimates that 30% of Americans have poor or bad credit, according to the company’s 2015 Vantage Score 3.0 data. Furthermore, people with scores between 300 and 600 are most likely denied access to good lending opportunities due to their low score status. 

This isn’t just a struggle for someone new on their own but also for those whose economic downturn has hit in recent years.  

The majority of people don’t have excellent credit, but there are still some who do. On the other end of the credit world, only 22% of people have an “excellent” or a super prime score between 781 and 850 according to data from Experian – scores that fall in either category would be considered traditionally excellent by financial experts. 

The rest falls somewhere on this scale while being placed into one group or another, depending on their FICO’s number ranking at any given time.

After a string of failures, some people with bad credit may have given up on ever starting another business. But this is not the case for all! If you need a new start or just want to accept card payments and increase your chances at survival, Bankcard should be one option among many that you explore. We’re high-risk merchant account specialists. We get things done that other companies would really struggle with. 

A high-risk business needs a bad credit merchant account. Of course, there are various reasons why the company might be classified as such, including bankruptcy or poor customer service ratings. Regardless of these factors, though, it can make finding reliable payment processing difficult for any high-risk businesses out there looking to get started with accepting cards online or in person. 

A merchant account provider that specializes in high-risk industries and offers quality services? 

That sounds like Bankcard. 

We have a special team dedicated to the needs of merchants in these risky sectors, which is why we’re able to process credit card payments for so many businesses that others would otherwise turn away.

How Do Credit Scores Affect Credit Card Processing?

Your business and you, as an individual, have separate credit scores. You are judged by your personal score, while businesses can be evaluated based on their own records in addition to the owner’s history with creditors. For example, suppose a new company has no previous financial dealings of any kind. In that case, they will likely rely heavily on the owners’ past or current behavior when it comes time for initial approval from companies like Visa who make hard decisions about giving out loans because this is what sets them apart from other potential borrowers whose reliability already appears set in stone through established loan-buying habits.

Why is a good credit score critical for taking payment in the form of cards? After all, you’re not the one spending or borrowing… your customers are. So what does information about your business’s ability to pay off loans have to do with your customers paying by their card? First, banks and other financial institutions need more than just good customer service when they issue a line of credit- that means looking at how much money someone can borrow on top of what he already has before handing out an overdraft loan. And if banks know whether it will be worth it in the long run because this person pays his bills quickly and well, they won’t needlessly charge fees each month while still making a profit from interest rates charged annually over time!

When a customer pays you with a credit card, the merchant has to wait for up to 60 days before they get paid. Thanks partly due to your bank and their bank fronting money until the customer ultimately pays out of their own pocket. The customers pay, on average, 30-60 days after using their credit cards at merchants’ stores. This is because both banks have essentially agreed upon ‘fronting’ this cash for those persons who’ve spent it – meaning that it won’t be released into one party’s account (the store) unless another agrees first (customer). The banks want you to have responsible financial habits so that they don’t lose any money from purchases if a customer is dishonest or refuses payment.

This is why your financial stability can make or break a business, and this is why credit card processors pull the plug on you.

Requirements For Applying For A Bad Credit Merchant Account

Bankcard has a great tool to help merchants get started and set up. To use it, simply fill out our application online and upload the corresponding documents (specified below).

  • Valid, government-issued ID (Driver’s license or passport)
  • A pre-printed voided check OR certified bank letter
  • Three months most recent business bank statements (or personal if there’s no business banking history)
  • Three months most recent processing statements (if applicable)
  • Social Security Number (SSN)
  • Employer Identification Number (EIN or TIN)
  • Fully operational website URL

The business account application process is like a credit score but for your company. To be considered reputable, you must prove that you’re complying with all the rules and regulations set forth by the processor or underwriter. Some factors that determine risk include:

  • Credit Score
  • Processing History
  • Bank Statements and available funds
  • Website
  • Chargeback ratios

If a site doesn’t have solid privacy and refund policies posted, the factors will negatively impact their applications. A negative bank account balance, unpaid bills, late payments, as well as high chargeback rates, also increase risk when it comes to applying for merchant accounts. The best way to prepare for an underwriter’s review is by satisfying outstanding bills and debts, having a substantial sum of money in the bank, or ensuring they have someone on their team with excellent credit history apply.

Why Chargebacks Are More Likely With Bad Credit Accounts

It’s not hard to see why bad credit businesses are a headache for underwriters. They already have low FICO scores and will most likely file bankruptcy or tax liens in the future, which can lead to them being sued by clients who claim they didn’t make payments on services rendered. What makes matters worse is that these establishments may lack experience with dispute resolution since there’s no one around trained in handling it internally. In addition, the days of good customer service are gone. Customers often get frustrated with the lack of available representatives and hang up without any resolution to their problem, meaning chargebacks could be coming your way if you don’t handle them quickly enough.

Receipts are the key to customer satisfaction. They provide quick access to a retailer’s contact information and help jog customers’ memories of their purchases; however, they’re not always available in electronic or paper form.

Recurrent billing means more chargebacks than monthly invoices. Chargeback rates are usually higher for recurring products because they don’t occur often, so when the charge appears on a statement, it can take customers by surprise and trigger them to contact their credit card company. This is especially true if customers were unaware that this type of payment was set up in the first place or didn’t know what it entails since many companies use recurrent billing as an easy way to automatically bill their clients who may not be around all day at work without having staff available 24/7.

Bad credit merchant services are a costly endeavor, and when consumers find themselves strapped for cash, they may dispute transactions to save money. Also, smaller businesses often don’t have the business sense, customer skills and time to maintain happy customers. On the other hand, a big company can offer 24-hour service with a bigger staff that may be able to avoid disputes by offering refunds on credit card charges.

Why Chargebacks Are Detrimental To Your Bad Credit Merchant Account

When a customer calls their credit card company to dispute the charge on their statement, they trigger an investigation. The issuing bank is asked for documents from the merchant that processed and approved this disputed transaction to ensure it was legitimate. This process has become particularly tricky because even though whoever ends up being correct about what’s going on doesn’t matter as much as when someone noticed there might be something amiss with a specific purchase or bill-paying activity but didn’t call until after some time had passed since discovering those discrepancies–which still constitutes notice of them given by law (specifically section 1666(c) ‘s mandate).

The customer complaining about the charge is a red flag for processors and sponsor banks because it usually means something wrong with the merchant’s business model. Every complaint gets factored into your chargeback ratio, which, if too high, can result in termination of your account or difficulty getting approved again.

Credit card companies levy fines for those who exceed the 2% chargeback ratio, and if they hit a certain threshold of excessive chargebacks, then processors can shut down their merchant account. This isn’t good news to any business owner that relies on credit cards as an accepted form of payment because it means less money coming in from potential customers.

Credit card processors terminate the bad credit merchant accounts of those with chargeback ratios greater than 3%. Many merchants don’t realize that their ratio contributes to their ability to operate, whether they win or lose a dispute. The bigger problem for them is once a processor shuts them down – it won’t be easy getting another one. A past terminated account is one factor that negatively impacts acceptance rates when applying for new business merchant accounts.

Steps To Remedy Bad Credit Merchant Accounts

If you’re a business owner, finding the right merchant account is crucial. If your company falls under any of these categories: high-risk or risky industries (i.e., adult dating websites and gambling), locating a reputable provider can be complex but not impossible! A growing “industry” is the bad credit merchant industry. While many people deserve a chance to operate their own business, those with bad credit have even more of an uphill battle in this tough economy.

Credit and debit card processing is an integral part of the modern world. If you want to take payments from your customers, you must have a merchant account to pay for their purchases. However, if there are any financial issues – such as bad credit or bankruptcy- the chances are high that finding a good deal on this type of service will be difficult.

Once you’ve accepted the reality of your bad personal credit, it’s time to get creative. You don’t have to give up just because you can’t secure capital right away. Bad personal credit is life’s perfect storm: an economic and social disadvantage that leaves many people without access to start-up funds for their business ideas. If this has been holding back from launching or expanding your company, there are ways around it!

Chargeback Control

Unfortunately, the cause of chargebacks is never a concern for processors or credit card companies. They only think about merchants keeping their 2% ratio and not giving themselves any chance to make up that difference in revenue loss with other sales opportunities by increasing this number.

To keep chargeback ratios low, merchants should offer refunds to customers with the complete understanding that a refund is less costly than a strike against them. A customer service representative can avoid this by providing the refund right away and then working on providing an upsell or new paid service to avoid losing any more future business from that same client. Removing the chargeback risk of the first transaction expands your merchant’s ability to process it in the long term.

Since credit card companies are cracking down on chargebacks, merchants should be transparent in their transactions. This ensures customers recognize payments and purchases so they’ll feel more secure with the merchant’s services. So, to help avoid unhappy customers (which can lead to a bad reputation), merchants also need transparency through email receipts after every transaction is completed.

Bankcard’s Chargebacks911 program is a foolproof way to reduce your chargeback ratios and ensure that you get every dollar of the sale. It’s been shown that as much as 25% of a merchant’s chargeback ratio can be trimmed by using an alert system. In addition, bad credit companies can shield themselves from potential losses and keep their accounts in good standing by proactively pursuing these.

Social Lending

Seeking unsecured working capital is a wise decision for any business owner. Many social lending sites offer you the best rates and alternatives to traditional bank borrowing, making it much more accessible than ever! Social Lending provides members with an easy way of getting hands-on capital by connecting lenders and borrowers together in both directions so people like yourself who need funds will have no problem finding someone willing to lend their ear– which means there’s never been a better time or opportunity than now when Bank interest rates are sky-high thanks primarily due to too-tight restrictions on credit.

Though viewed as personal loans from private individuals rather than banks themselves, money received through this form of financing could be used for anything, including launching small firms and running them!

Micro-Credit Unions

You don’t have to be a high roller or big-shot company for access to capital anymore. Small credit organizations are now all the rage, specifically designed and sponsored by the SBA (Small Business Administration) with one goal in mind: getting your business up on its feet and running strong as soon as possible.

Micro-credit unions provide budding entrepreneurs with a wealth of knowledge, so they can prosper for years to come.

Equipment Lenders

To set up an office for your new company, you need equipment. Equipment lenders understand this and offer loans to help small companies get the tools they need to run smoothly from day one. Even though these are high-risk business loans where the equipment itself provides the collateral in case of default or nonpayment on time, a lender will overlook any bad credit history if it deems that risk worth taking because there’s potential for significant payoffs!

Tap Into Assets

Most businesses graduate into a business after one year of operation. These new companies generate financial assets but cannot expand their bottom line because they lack the necessary working capital needed for them to grow and thrive.

Although these assets are vital resources in securing financing, they can also speed up cash flow or fund payroll. They may also help complete orders and conduct additional marketing.

No Credit Check Merchant Accounts For Those With Bad Credit – Do they Exist?

There are two general ways for a business to take credit cards. Apply for a merchant account through a traditional processor or sign up with third-party processors like PayPal and Square, among others. With the former (traditional), you’ll absolutely have to go through credit checks before approval; however, some of these less reputable companies may be misleading in advertising their products as “no check needed” when they still do require one! Third-party processors offer more flexible options but don’t always provide all necessary features such as customer loyalty programs and fraud protection plans that come standard on many traditional accounts.

What About Bad Credit Instant Approvals?

Unfortunately, there is no such thing as a bad credit merchant account that has instant approval. So if you’re looking to open up a merchant account, it will often take a few days for approval.

Merchant account providers who advertise instant approval are dangerous because they don’t take the time to find out if you’re a good fit. As a result, you’ll often end up paying exorbitant fees or be terminated without warning, which can put your business in jeopardy.

At Bankcard, we make sure that doesn’t happen. Our program is designed to ensure that we don’t proceed with an application until you’ve been pre-approved for a merchant account!

Zero Credit Check Processor Exist, But Tread Cautiously

If you require a credit check and will not pass one, consider third-party processors such as Square, Stripe, or PayPal. These companies only ask enough questions to ensure that they comply with laws related to money laundering and identity verification before allowing new businesses to process cards on their platforms. They do not check your creditworthiness or the businesses. If you have a poor credit history, third-party processors might be more interested in your business as they are not worried about the financial risk. However, they will take an interest in how well your company functions with its services and if it can prove its ability to make payments on time.

As with any business arrangement, there are some downsides to using third-party processors. The most common issue is account instability. Third-party providers tend to be very risk-averse and will stop doing business with you the moment your account does something outside of their norm – a large chargeback percentage or suspicious activity that suggests fraud usually does it first. Often, they won’t notify you before making this decision nor explain why they’ve made such decisions; instead, they just inform you that their working relationship has ended because of these issues.

If you’re new to the business and have an industry that is typically categorized as high risk, third-party processors aren’t for you. Third-party processors won’t work with the general category of businesses they consider risky due to their limited resources. It’s helpful to research which industries a payment processor won’t work with before engaging them. This information is often easily found on their websites. In addition, there are frequently lists of “restricted” or prohibited business categories that you should check against when exploring your options for third-party processors.

Merchant accounts are valuable tools for businesses and can be challenging to obtain if you have bad credit or operate in a high-risk industry. But, if this sounds like your situation, don’t worry! There’s still hope with a “high-risk processor.” Bankcard is one such company that has helped many small businesses get the merchant account they need.

What To Expect With A Bad Credit Merchant Account

High-risk merchants often have to establish a reserve deposit for their merchant bank account to be approved. This means the retailer will hold on to 5-10% of all transactions until an agreed-upon amount is reached, which serves as collateral if they fail or refuse payout fees and chargebacks. After six months to one year, this fund can generally be removed, but it depends on how cleanly your business has processed its credit card payments/transactions so far with the particular merchant bank you’re using. When a merchant closes their account, the reserve balance is kept for 6 months. After that time, it will be released back to them.

While high-risk merchants will sometimes have to endure a reserve fund, this is not the only inconvenience though; other standard features include:

  • Higher processing rates and fees
  • Long term contracts (usually about three years)
  • Early termination fees
  • Cancellation fees

There’s a reason that these unfavorable contract terms are being forced on high-risk merchants, and unsurprisingly, it all comes down to risk. In many ways, it’s fair for processors to take a chance with the high-risk merchants but insist on the long working relationships because they can balance losses from chargebacks and frauds with the higher fees over a more extended time period to recoup the lost money.

If you’re a high-risk merchant with bad credit, it may seem like there’s no way to get an online business off the ground. However, don’t settle for just any company – shop around and talk to other processors until you find one that offers reasonable rates, good contract terms, and satisfies your needs! Also, provide financial documents such as bank statements or history of processing to prove your soundness. After actively negotiating with multiple companies, eventually, you’ll get an acceptable deal on something all-around beneficial!

Bankcard understands the unique needs of different Bad Credit-related businesses. We’re here to offer options for entrepreneurs and merchants who have low credit scores or poor credit histories, bankruptcies, or those in need of high-risk merchant accounts. You can find everything you need all in one place with Bankcard, so don’t hesitate to contact us today.