Getting Approved or Rejected for a New Credit Card Processing Account
The approval process for new credit card processing accounts is unique to the industry. Each credit card processor and some reseller Independent Sales Organizations (ISOs) have their risk/underwriting departments. The departments determine whether a business can be approved to accept credit and debit cards. In this article, we’ll explain the most frequent reasons for approval or rejection.
Representatives from the credit card processing industry often have very little training. Since the vast majority don’t make it more than a few months in the industry, chances are the rep filling out the agreement is a new hire. They may not have experience in filling out new agreements and therefore either omit or write incorrect information. Any business must read, double-check, and ask questions to ensure that all information is accurate. It is also critical for a business to make sure to include all supplementary documents with the application, including corporate records, industry licenses, etc. If the information is not accurate or requested materials are missing, the agreement may be rejected.
Company Owner History
Most reps won’t admit this, but nearly all business applicants will be required to submit a social security number for at least 50% of business ownership for a credit check. In addition to credit scores, the risk/underwriting department will also search for prior or current personal defaults such as tax and property liens, short sales, foreclosure, bankruptcy, and more. Credit card processors almost always require a personal guarantee from 50% of ownership. The risk/underwriting department wants to confirm that in the event of a problem that ownership has a history of paying all bills.
In addition to personal credit history, credit card processing risk/underwriting employees will examine the applying business’ history. Such history includes business credit, but more importantly, it also includes credit card processing history. For example, they want to know if an applying company has previously accepted credit cards. If so, they will ask for recent credit card processing statements. If the requested monthly sales volume, average transaction, or other processing parameters are inconsistent with the previous processing history, the risk/underwriting department may be concerned. Additionally, risk/underwriting employees will cross-check applying business with the industry blacklist known as the Terminated Merchant File or MATCH list.
There are high-risk industries such as gaming, firearms, adult entertainment, travel, network marketing, and others. Some of these industries are considered high-risk due to potential fraud, frequent chargebacks, or political considerations. While these industries are often outright banned, tangential industries may be affected. The credit card processing risk/underwriting employees categorize businesses often in illogical ways. Therefore, very low-risk companies face incorrect grouping with high-risk industries through no fault of their own.
Company Sales and Deliverables
Certain factors of how a company accepts payment or delivers its product or service may be grounds for rejection. Accepting more than a small fraction of international credit cards, having too high of an average sale or using a fulfillment center for product delivery is grounds for rejection. Also, having a long gap between order placement and the deliverable is a red flag. Most frequently, products sold in person as opposed to online or by phone may cause an issue. For example, buying prescription medications or dietary supplements at your local pharmacy or nutrition store is considered a low-risk transaction. Accepting payment in a non-face-to-face manner automatically may result in outright rejection.
Don’t Take on the Credit Card Processors by Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you switch credit card processors, see if you qualify for IdealCost.com’s monthly savings program by uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or need to switch credit card processors due to funding delays, technical issues, or customer service problems, contact us first for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.