offers high risk merchant account for credit repair, law firms, and other businesses in the credit counseling industries. There are two essential reasons credit repair businesses are deemed high risk by acquiring banks:
- A typically high rate of chargebacks
- Merchants exceeding volume caps
Customers turn to enhance their credit score. Most buyers who look for payment processing for credit repair are viewed as high-risk clients with bad credit; are likely in financial chaos themselves, and have relatively less money.
Services of Credit repair organizations and a Merchant account for credit repair business are costly and referred to for making promises, for example, improving your credit score considerably and rapidly. They do this by searching for mistakes and unjustifiable reasons why a client’s credit score dropped, at that point debating and negotiating with the best possible credit reporting officials to have things expelled from a buyer’s credit report. Most organizations perform several services, such as bringing down obligation with creditors and offering guidance and system on building and maintaining credit.
Be that as it may, this is where credit repair merchants experience inconvenience: On the events when the client pays with a credit card and is disappointed with the outcomes by the dealer – which happens often – the client will file a chargeback. Different purposes behind chargebacks include:
- Credit repair isn’t cheap, which, when dealing with high-risk customers, enhances the chances of a chargeback, which is actually the biggest problem approving credit repair merchant account.
- Many agencies are small and lack customer support resources, leaving customers impatient.
Moreover, credit repair merchants have always assessed a volume cap which cannot be exceeded. Unfortunately, many merchants do. With solid processing and low chargebacks, however, volume limits are negotiable after 3-6 months.
Why Acquiring Banks Are Turning Down Merchant Account for Credit Repair Business
In recent years, we’ve seen acquiring banks shun credit card processing for high risk businesses, particularly credit repair agencies. They simply do not want to assume the level of risk such businesses have.
Think about it: A credit repair business accepting credit card payments from clients who are trying to repair their own credit. Such a premise borders on the contradictory. Nevertheless, we find the vast majority of credit repair merchants prefer credit card payments for such – not check solutions or cash.
We understand the merchant’s side: accepting credit card payments for credit repair is easy guaranteed payment for the merchant (even if it may be putting the customer further into debt). Cash and check solutions, though more practical (and financially sensible) for the customer, do not guarantee a steady stream of income.
The Ins and Outs of Getting a high risk merchant account for credit repair
In the present market, bad credit is normal, so there are many credit repair organizations that have entered the marketplace. Our specialized high risk merchant account services for credit repair services stretch out to high risk merchant accounts for credit repair organizations.
Solutions For Credit Repair Merchants
Credit card processing for high risk businesses, particularly credit repair, has become exceedingly difficult due to the large credit card issuers collective diminishing tolerance for chargebacks. iPayTotal has credit card processing solutions for many high risk businesses.
Businesses Within the Credit Repair Industry
The credit repair industry intends to enhance individuals credit scores by discovering errors in credit reporting and disputing inaccurate data with the appropriate organizations. Customers who regularly buy these services are the individuals who have credit issues associated with a bankruptcy or a recent lifestyle change, such as divorce.
What underwriters look for during the application process of high risk merchant account for credit repair
Amid the merchant account application process, processors and underwriters need to see that credit repair merchants are running genuine, respectable businesses. Underwriters evaluate risk by searching for any warnings, including whether they are following all credit repair rules and and directions.
Risk is determined by taking a look at a merchant’s credit scores, credit card processing history, bank statements, and its website. If a website doesn’t have strong privacy and refund policies posted, the elements will contrarily affect their applications. The risk increases to a credit card processor when a merchant has a negative bank account balance, unpaid bills and late payments, and a history marked by high chargeback rates.
The most ideal approach to get ready for a underwriter’s audit is for a merchant to fulfill remarkable outstanding bills and debts, have a considerable sum of money in the bank, and have a partner in the business with the best credit history apply for the merchant account. Anything that looks or appears questionable ought to be taken care of before it gets in the hands of an underwriter.
Eventually, merchants need to show processors and underwriters that they are not going to take any unnecessary risks when they approve a credit repair merchant account. Proactive merchants are probably going to get approved for accounts without constraints.
How to get high processing volumes for credit repair merchant accounts
Each business needs to get sales of a $100k every month or more. Nevertheless, since many credit repair businesses are small or new, many are given a month to month credit card processing volume cap. This implies merchants are just allowed to deal with a specific number of credit card transactions every month. When that cap is attained, the merchant can’t take any more purchases, basically shutting the business. Merchants in this industry regularly end up with a cap of close to $50k.
Successful merchants don’t get stuck with this cap for a long time. Credit repair merchants that require higher volume ceilings can ask for new caps in as few as 3 months. Businesses that substantiate themselves by paying their bills, have low chargeback proportions, and have some money in the bank can request that a processor thinks about raising their caps.
Why credit repair merchants are susceptible to chargebacks
Credit repair merchants are powerless against chargebacks generally because of the business and its customers. Clients who require credit repair businesses have bad credit, so it is likely they have minimal expenditure or none. A modest income can make people make dishonest moves to clutch their cash, regardless of whether it implies questioning legitimate credit card transactions.
Also, there are a lot of customers who have real transaction grievances however don’t realize how to deal with them. The individuals who do call to complain frequently get disappointed and hang up if the call or issue isn’t dealt quickly or they get a business delegate who has no client service skills. A troubled customer is certain to result in a costly chargeback.
A lack of electronic or paper receipts is another issue that outcomes in a chargeback. When customers don’t have receipts, they don’t have speedy access to a retailer’s contact data. There likewise is a decent possibility that customers forget they acquired credit repair services when they audit their credit card statements.
Rather than month to month invoices, credit repair merchants regularly send repetitive bills for their services. At the point when the charge appears on statements, it can overwhelm a customer. It can lead to clients disregarding the services and afterward, questioning the transaction since they never again needed or required the services.
Credit repair services are not that cheap. Since the charges are frequently noteworthy, a disappointed, cash-strapped customer may take a look at cutting these services as a straightforward method to cling to additional cash.
As mentioned, most credit repair businesses are small and likely don’t have an outstanding reputation or a reliable brand name. A less-settled business regularly does not have the marketing sense and client service expected to keep customers happy. Smaller may not offer 24-hour customer service or present refunds and incentives forces that bigger, progressively settled merchants may provide for customers to keep them from disputing a credit card transaction.
Many credit repair businesses don’t understand that their chargeback ratios, regardless of whether they are won or lost, add to their capacity to work a business until the point that it is past the point of no return. Excessive chargebacks can prompt a terminated merchant account and the business’ capacity to get another.
Why processors care about chargebacks
Extreme chargebacks demonstrate to processors that a merchant has a flawed business model. Client disappointment, an absence of client service, and an lack of mitigation plans lead to chargebacks, which are the point at which a credit card provider requests a merchant pay the loss of a disputed or fraudulent transaction.
The primary reason credit card processors have little resistance for merchants with high chargeback rates since they get hit with financial penalties. Processors confront potential fines from credit card organizations, as MasterCard or Visa, at whatever point a business surpasses a 2% chargeback ratio. Processors can be charged fines that add up to a large number of dollars for every merchant. Organizations with over the top chargebacks turn out to be unreasonably costly for credit card processors, and the outcome are terminated merchant accounts.
Credit card processors terminate high-risk merchant accounts for those with chargeback ratios of over 3%. The more concerning issue for merchants is before a processor shuts them down, it is exceptionally difficult for them to get approved for a second merchant account. A past terminated account is one of the factors that works against a credit repair business while applying for a merchant account.
Keeping chargeback ratios down
In contrast to many other industries, there isn’t excessively fraud and stolen credit cards in the credit repair division. More often than not, chargebacks are the result of disappointed customers. The reason for chargebacks is never a worry for processors or credit card companies. The main thing they care about is chargeback proportions higher than 2%.
The most ideal approach to keep chargebacks low is to offer customers full refunds. A refund is considerably more practical than a chargeback. At the point when a disappointed client contacts a merchant, the client service agent should immediately offer a full refund as opposed to clarifying the charge and the terms of the transaction. After a refund and receipt are issued and gotten by the customer, the merchant should then attempt to give another paid service. Making this move expels the chargeback capability of the principal transaction and gives the merchant’s capacity to process in the long term.
Since excessive chargebacks are because of clients not recollecting or identifying transactions on their credit card statements, merchants are urged to utilize clear charging descriptors. The merchant’s name and contact number ought to be incorporated into the descriptor. Transparency and open imparting likewise can lessen chargebacks. It is a smart thought to send an automatic email receipt once a transaction is finished.
Chargeback mitigation programs, as Chargeback Suite that iPaytoTal offers are great approaches to keep chargeback proportions down. iPaytoTal has made best Built-in fraud prevention tool for high-risk merchants, including credit repair businesses that make it easier to fight chargebacks.
By actively pursuing chargebacks, credit repair companies protect themselves from losing revenue and keep their merchant accounts in good standing.