What to do if you've been declined card processing?
Libby James ????
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Why has my merchant account application been declined?
Starting a business has numerous financial complexities, it can feel like a bit of a minefield and most new business owners choose to approach their existing bank for funding,?business bank accounts?and?card processing.?So, where do you start if they decline your application? Here, we’ll take a look at what to expect when working in ‘high risk’ industries and how to make sure you apply to the most suited bank for your requirements.
Why has my card payments account been declined?
When applying for card processing, as with any type of financial agreement, your application can be declined for many reasons. It’s important to establish why the bank you approached doesn’t want your business before looking for alternatives, so here are some possible reasons;
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Why is my new company deemed as high risk?
The most common cause for applications being declined is falling outside of the bank’s criteria, meaning they consider it too risky to onboard your new business. Your company could fall into the?high-risk category?due to a number of factors, the main ones are historic?chargebacks?and fraud within the sector.?
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A chargeback is where the customer raises a complaint against the business and is refunded, it’s then up to you to contest the issue in order to obtain the funds. A prime example of this is customers not receiving delivery of goods. This is why terms and conditions, as well as complaints procedure, feature heavily in the application process for new businesses.
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I’ve been declined, can I get an account elsewhere?
Being terminated or declined card processing can come as a nasty shock for new business owners, however just because you’ve been rejected by one bank doesn’t mean another won’t want to onboard your company.
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As previously mentioned, it’s important to establish why your application was declined. That way you can look at approaching the right alternative processors. For example, if your application was declined due to a previous credit issue then it’s important to disclose your credit history on the next application.
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Each bank has a set of individual criteria that regularly change, some will be willing to onboard higher risk companies and others won’t. For the banks, it’s all about balance and ensuring their portfolio of customers fall within their risk appetite.
When looking for alternative card processing it’s worthwhile using an?un-biased Broker. They should be up to date with the most recent criteria for the panel of banks they use and therefore be able to establish where your company would best sit.
Terminated accounts for new business
Challenger banks such as?PayPal?will offer a quick turnaround time when it comes to setting up payment processing. The downside to this is that they will often onboard new or smaller businesses, then terminate them after a short period of time.
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Your notice period will depend on the existing bank you use; however this can sometimes be with immediate effect, which can cause additional headaches for new companies. This highlights the need for both?cost effective?and suitable card processing.
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What should I expect when using an alternative payment processor?
When it comes to money, most will want to use a bank they have heard of with a reputable history. However, depending on the industry your new business is targeting, high street options may be out of the question.?
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As well as checking out reviews it’s important to do your research in terms of service levels, especially when trading online. Ensuring your preferred bank and payment gateway are not only secure but assist you with keeping chargebacks and the risk of fraudulent transactions as low as possible.?
Alternative providers who will accept applications from higher risk businesses, which are also start-ups, may require additional paperwork to support your application and can also request a?rolling reserve?is put onto your account.?
What’s a rolling reserve??
A rolling reserve is a deposit which will sit on your new account, helping to counterbalance the risk involved in processing payments. The bank will offer terms and a rolling reserve, which means a percentage of processed funds will remain on your account for a stated period of time (ordinarily a few months).
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For new businesses this can feel like a bit of a blow, having funds withheld from you in the first few months can be tough. It’s important to remember that a rolling reserve is protection for you as a business, as well as the bank. Think of a rolling reserve as your safety net.
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Cost of card payments with alternative processors
Despite being declined by your existing bank or preferred provider, the cost of processing with a higher risk bank may not be as extortionate as you might think. When approaching banks it’s always worthwhile to have a copy of your quoted costs (even though you’ve been declined), setting the level of expectation with your new bank will help lower their?comparative quote.
Help with declined merchant account applications
Merchant Advice Service works alongside businesses who have been declined or?terminated?by their existing card payments and?gateway providers.
Alongside our banking and ISO partners we are able to assist with alternative processing suppliers. In a nutshell, just because you’ve been declined by one bank doesn’t mean you’ll be declined by them all. These connections allow our experts to understand where your application can be successfully placed. Speak to us today.
Bass Pro, White River Marine Group, A/M Parts. All opinions expressed are mine and not my employers.
2 年Libby, great informative post!