Bad Credit Merchant Account Providers and Approval Process

Bad credit merchant account providers can be a lifeline for businesses with a less-than-perfect credit history. They offer an opportunity to accept credit card payments, even with a low credit score.

These providers often have their own approval process, which typically involves a manual review of the business's financial history. This process can be more time-consuming than traditional merchant account applications.

Businesses with bad credit may face higher fees and stricter terms, but some providers offer more flexible options. For example, some may require a higher reserve or a larger deposit upfront.

To qualify for a bad credit merchant account, businesses typically need to demonstrate a stable cash flow and a legitimate business model. This can include providing financial statements, tax returns, and other documentation.

A bad credit merchant account is a type of account that's designed for businesses with less-than-perfect credit.

To be labeled as a bad credit merchant, you'll likely fall into one of these categories. If your FICO score is 580 or less, you'll be considered a bad credit merchant. This mainly applies to first-time business owners, as banks won't have an established business record to examine.

Prior bankruptcy is another reason you might be placed in the bad credit category. If you've had a business end in bankruptcy or filed a personal bankruptcy, it'll stay on your credit report for either seven years (Chapter 13) or ten years (Chapter 7).

Outstanding liens can also negatively affect your credit score and put you in the bad credit merchant category. Liens filed against your property by the IRS for unpaid taxes will hurt your chances of getting approved, but a lien filed by a lender for a loan to finance something like solar panels might not be as big of a deal.

An outstanding judgment imposed by a civil or criminal court will have a significant negative impact on your creditworthiness until it's paid.

Bad credit merchant account applications require additional documentation, including bank statements (3-6 months) to showcase your business's financial position and processing statements to reveal your existing chargeback ratio.

Payment processors may impose limitations on merchant accounts issued to businesses with low credit scores, such as volume restrictions and reserve amounts of funds as a deposit.

High-risk merchant accounts typically come with caps on the maximum amount you can process in a month, which can be frozen if exceeded without coordination with your provider.

Some merchant services providers require a minimum credit score of 580, while others may consider applications with lower scores, but with higher fees and reserve requirements.

A ChexSystem report may be used instead of a credit check to assess your business's creditworthiness, but a merchant account will typically require a credit score of at least 500.

Here's a summary of potential limitations:

Being transparent about your business's processing volume expectations can help avoid these limitations and ensure a smoother relationship with your merchant services provider.

To get a merchant account, you'll need to meet certain requirements, which can vary depending on your credit score and business history.

A minimum credit score of 580 is often required for a merchant account, although some providers may have higher or lower requirements.

You'll also need to provide documentation, such as bank statements and processing statements, to demonstrate your business's financial stability.

If you have bad credit, you may need to provide additional information, such as a history of your business's income and expenses.

Here are some common requirements for a bad credit merchant account:

A credit check is not always required to open a merchant account, but a ChexSystem report may be used to assess your business's checking and savings account history.

Monthly volume limitations can be a major constraint for businesses, especially those with high-risk merchant accounts. High-risk merchant accounts often come with caps on the maximum amount you can process in a month.

If you exceed this amount without coordinating in advance with your provider, your account may be frozen until the end of the current billing cycle. This can be a major disruption to your business operations.

Fortunately, being transparent about your expected processing volume can help you avoid this issue. Honesty is always a good policy in the credit card processing world.

You can often negotiate an increase in your monthly processing volume limit once you've been with a provider for a while. However, this requires open communication and collaboration with your merchant services provider.

Exceeding your monthly volume limit without permission can lead to frozen funds, so it's essential to stay within the agreed-upon limits.

Researching providers for a bad credit merchant account is crucial to finding a reputable and reliable partner. You should only partner with experienced providers who can ensure proper due diligence is performed and necessary security measures are put in place.

Bad credit merchant accounts can be obtained from various providers, but contract terms, processing rates, and account fees vary widely. Be prepared to negotiate and be aware that the criteria for being labeled a bad credit merchant vary between different providers.

To find a suitable provider, consider the following: look for providers that specialize in high-risk accounts, check their reputation and customer reviews, and be aware of the criteria for being labeled a bad credit merchant. Some providers, like Durango Merchant Services, offer fair pricing and excellent solutions to complex merchant situations.

Here are some key factors to consider when researching providers:

Note: This is not an exhaustive list, and it's essential to research and evaluate multiple providers before making a decision.

Researching providers for a bad credit merchant account can be a daunting task, but it's essential to find a reputable provider to ensure your business's financial stability. Look for providers that have experience working with high-risk merchants and can offer proper due diligence and security measures to decrease the likelihood of account termination.

Reputation is key when choosing a provider. Experienced providers can help you navigate the process and ensure you're not taken advantage of. A company's reputation can be a good indicator of their reliability and trustworthiness.

Consider the type of industry you're in and how it may affect your account's risk level. High-risk industries, such as adult entertainment or CBD products, may have stricter requirements or higher fees associated with them. Payment service providers like Square, PayPal, or Stripe often have a quick approval process, but may shut down your account at the slightest sign of unusual activity.

When evaluating providers, look for those that specialize in working with bad credit merchants and have a solid reputation for sales practices and customer support. PayKings, for example, has a reputation for getting merchant accounts approved for businesses that other providers can't accept. However, be aware that high-risk merchant accounts often come with higher fees and more stringent requirements.

Here are some key factors to consider when researching providers:

PayKings is a high-risk merchant account provider that's quickly establishing a reputation for getting merchant accounts approved for businesses that other providers aren't willing or able to accept.

They accept bad credit merchants and offer an extensive discussion of the ins and outs of bad credit merchant accounts on their website. They work with a network of over 24 acquiring banks and processors to find you an account.

You can expect your merchant account to come with pricey tiered processing rates, numerous account fees, and a long-term contract. At the same time, PayKings has a solid reputation for both its sales practices and the quality of customer support it provides after the sale.

Like many of our other top choices, PayKings does not charge an application or account setup fee for new merchants.

Here are some of the key features of PayKings:

PaymentCloud is a high-risk specialist that accepts bad credit merchants, offering a unique solution for those who may have struggled to find a payment processor in the past.

One of the standout features of PaymentCloud is its "free" credit card terminal, available with every account. This can be a huge cost savings for businesses, especially high-risk ones that may need to process a high volume of transactions.

PaymentCloud also offers mobile processing solutions, virtual terminals, and a range of payment gateways, including Authorize.Net and USAePay.

If you're worried about the application process, don't be - PaymentCloud doesn't charge application or account setup fees, making it a more affordable option.

Here are some of the key features of PaymentCloud:

PaymentCloud's hands-on approach during the application and underwriting process is also a major plus, as is the intensive follow-up support and advocacy provided to existing clients. This level of service can make a big difference in helping businesses succeed.

Durango Merchant Services is a high-risk specialist that markets directly to bad credit merchants, offering fair pricing and contract terms. They have a dedicated account manager for customer service.

Durango provides a range of products and services for eCommerce and retail businesses, including high-risk merchant accounts, international merchant accounts, and cryptocurrency merchant accounts. They also offer a payment gateway and virtual terminal.

One of the standout features of Durango is their transparency. They publish a detailed page on their website explaining the factors that can make you a bad credit merchant. They also provide pricing information in the form of a range of processing rates and account fees.

Durango's customer service far exceeds the industry standard, with a dedicated account manager for customer support. They also have a knowledgeable sales team that can help you set up international merchants from any country in the world.

Here are some key features of Durango Merchant Services:

Keep in mind that Durango's processing rates and account fees are highly variable, and a long-term contract with an early termination fee may apply.

Some companies offer actual payment processing services, which can be convenient for business owners who end up getting both services from the same place.

Merchant account providers offer many services to businesses, but their main focus is on providing them with a way to process payments for their goods and services.

A merchant account is more like a holding tank for the money you bring in for sales, where the money is drawn from the customer's account and sent to your merchant account.

Any necessary fees are removed before the money is then transferred to your business bank account.

High-risk merchant accounts are a necessity for businesses with bad credit. You'll likely be labeled as a high-risk merchant if you have a low personal credit score, prior bankruptcy, outstanding liens, or outstanding judgments.

Bad credit merchants are viewed as inherently more risky, and most providers will only accept you under a high-risk account. Even if your credit score later improves, you may still be considered high-risk.

High-risk providers will often offer tiered pricing plans, which are generally more expensive than other options. You can expect to pay rates that are about two times higher than the industry average for low-risk businesses.

High-risk merchants should also expect to pay higher account fees, including monthly account fees that are frequently much higher than average. However, you may have some leeway to negotiate these fees when setting up your account.

Some high-risk merchant account providers offer interchange-plus pricing plans, which can be more transparent and affordable. However, these plans are not always available to high-risk merchants.

Here are some common characteristics of high-risk merchant accounts:

Keep in mind that having a bad credit history can make it difficult to find reliable credit card payment processing methods. However, high-risk merchant processors can provide many benefits, including access to a global market, chargeback protection, and security against fraudulent transactions.

The application and approval process for a bad credit merchant account can be complex and time-consuming. It may take up to two weeks to complete.

To get approved, you'll need to submit an application and provide any required documents to your provider. This is especially true for high-risk merchant accounts.

Businesses with bad credit, poor banking history, bankruptcy, low personal credit scores, or outstanding liens on property may need to seek out a high-risk merchant account provider. These providers can offer the security needed to grow your business.

Here are some characteristics of businesses that may need high-risk merchant accounts:

Fees for credit merchant accounts are typically higher due to the higher risk involved. These fees can range from 1-5% depending on the provider.

The approval process for a high-risk merchant account can be a bit more complicated than a standard account. It may take up to two weeks to complete.

You'll need to submit an application and provide any required documents to the provider. This is a crucial step in getting approved.

To increase your chances of approval, it's essential to be prepared with all the necessary documentation. This includes identifying the terms and fees that will be coming from the provider.

The underwriting process for high-risk accounts is more complex, which is why it may take longer to get approved. But don't worry, it's not impossible!

Here are the types of businesses that may be considered high-risk and need to apply for a high-risk merchant account:

Keep in mind that fees for a high-risk merchant account are typically higher, ranging from 1-5% depending on the provider.

Instant Approval can be a misleading term, as it often means your account will be approved quickly without a thorough underwriting process. This approach is problematic because it leaves you at a higher risk of having your account terminated suddenly if your processor flags any suspicious transactions.

The problem is that instant approval providers will collect basic information about your business and approve your account without doing a detailed review. This can lead to your account being closed and you being placed on the Terminated Merchant File (TMF, or MATCH List).

Being on the MATCH List can make it extremely difficult to get approved for an account with a different provider, especially if you already have a bad credit score.

Bad credit merchant accounts come with a higher price tag than their low-risk counterparts. You can expect to pay processing rates that are about twice as high as those offered to low-risk merchants, and recurring fees are usually higher too.

Monthly account fees are frequently much higher than average, but you have some leeway to negotiate this fee when setting up your account. Be sure to review your contract documents carefully to determine which fees you'll be responsible for.

Hidden fees are typically hard to find, so make sure to ask about them before you sign a contract. Many merchant service providers charge monthly fees and/or annual fees for their services.

Here are some common fees you might encounter:

High-risk providers will often only offer tiered pricing plans, which are generally more expensive than other options. You should generally expect to pay rates that are about two times higher than the industry average for low-risk businesses.