7 Steps for Seeking Merchant Account Approval


7 Steps for Seeking Merchant Account Approval

Direct response marketers applying for merchant accounts face new and different obstacles than they did several years ago, and must be careful to take the proper steps to get approved for an account with the most attractive terms. Take the following steps to ensure you get the most favorable treatment.

1. Apply to the right bank.

Certain banks don’t have a taste for DR business. In spite of this, these same banks try to handle all the business they can. The consequence is that banks will often approve merchants, only to ask them to leave shortly before or after they begin processing payments.

Companies that use trial offers and continuity programs could experience chargebacks, and thus, run afoul of a bank that isn’t ready for DR. Marketers with sudden peaks in sales also may be at risk. And just a few customer calls can panic certain payment processors.

If you partner with the right bank, however, you can continue to process payments even if your chargebacks go above 1 percent, 5 percent, or even 10 percent. Even better, you won’t be charged a penalty in the form of higher rates or reserves.

2. Consider your history.

Banks closely evaluate and often shy away from merchants with blemishes such as poor credit, liens, bankruptcies, and criminal charges in their credit histories. Banks look at the combination of your history, product offering, and current financial status in the decision-making process. You may be asked to prove that any liens and bankruptcies have been resolved before being approved for credit card processing. If you do get approved with a bad history, you may pay higher reserves.

3. If you’re a new company, pay your bills.

Having a new corporate entity and bank account is a bad start if you hope to access hefty processing volume. The sooner your bank account gets established and funded, the better; three months of steady, ample funding is the minimum recommendation.

If you do have a new company, pay any startup expenses through its account. Banks like to see startup expenses such as product manufacturing costs paid from a corporate bank account, as it indicates that you expect to exist well into the future.

Principals can expect banks to look at their personal financial information, including tax returns and bank statements, especially if your product is considered high-risk. A well-funded personal bank account can offset many challenges with your corporate bank account.

Banks also may ask to look into the backend of your campaigns, asking to see telemarketing scripts, vendor contracts, and product inventories. Make sure they match whatever processing volume you request, or it will send up a red flag. If your business has an existing payment processing history, you can expect less scrutiny.

4. Expect to pay a reserve.

Banks look at the total picture on a case-by-case basis; expect a reserve of at least 10 percent. Those with low credit scores, bad banking histories, risky products, high-ticket sales, trial and continuity offers, and low balances often get flagged for a reserve.

5. Have your Social Security number ready.

You must be a U.S. citizen with a valid Social Security number to obtain a domestic merchant account. It’s heartbreaking to hear a foreign-born marketer say, “nobody told me,” but that’s the way it is. Citizens of other countries can usually locate a business partner or corporate signer to partner with, and access processing.

6. Apply carefully.

Banks are concerned with how many merchant accounts your business has. The more accounts you have, the more unforeseen risk banks are exposed to. Some larger banks that underwrite risky products have combined underwriting.

Several payment processors that share Deutsche Bank on the backend now allow only one merchant account per product or website. And once one of those processors turns you down for merchant services, you can’t apply to another.

Again, those affected most are the marketers with multiple merchant accounts and selling on a trial or continuity basis. Fulfillment houses, call centers, media companies, and affiliate marketers selling traffic to these merchants will feel the pinch.

7. Consider an agent.

Agents are not tied to a single payment processor or financial institution, and can help you place your business with the right bank, establish multiple merchant accounts, and structure your corporate accounts properly. Agents can also negotiate on your behalf to access lower rates and fees, and will help you decide what paperwork to submit during underwriting, and what to hold back. You’ll be up and selling in no time.

Curtis Kleinman is vice president of business development for Swipe Payment Systems, a payment processor based in Los Angeles. He can be reached via email at curtis@swipellc.com or by phone at (310) 573-9019.