Credit Card Processing Merchant Account. Why so Many Hoops?
Setting up a merchant account to accept credit cards can be a frustrating experience for many business owners who are often times left feeling like they just finished an obstacle course in the process. Why is it so difficult for some businesses to be a approved for a credit card processing merchant account? At the Merchant Doctor we are occasionally posed the question: Why are there so many hoops to jump through?
There can be many reasons for a merchant account to be scrutinized by an underwriting staff creating request after request for more information while the credit card processing account set up time is dragged out over a long period and the patience of the business owner is tested. In this day and age of communication and information this seems unacceptable, however, it occurs frequently. Sometimes it is because the merchant is dealing with a highly inexperienced and poorly trained credit card processing sales representative, or the merchant is operating in an e-commerce environment, it could even be that they are selling goods or services that are questionable which would lead to high amount of charge backs or possible credit card fraud. This would create liability for the card issuing bank, the merchant, and the credit card processing - merchant service provider. Before we get into that lets start by pointing out that that most brick and mortar businesses selling goods or services that fall within the “acceptable merchant list” in the underwriting guidelines are generally approved within 24 hours with a reputable merchant service provider.
To Accept Credit Cards is More Complex than Many Think.
What many business owners do not understand when they want to accept credit cards is that, it is not simply buying a terminal, plugging it in, and routing funds to their bank account. It is a highly regulated industry with the FTC and the FED taking ever more involved positions making it more difficult than ever before to get a merchant account in an effort to curb credit card fraud. When you apply for a merchant services account to accept credit cards it goes through a process very much like applying for a home loan. Your credit will be looked at, a basic background check will be completed, and your business will be analyzed to ensure that is legitimate and legal. Since every transaction that takes place and is funded to your business is like a short term loan, any bank that wishes to be backed by the FCIC is bound by federal law. This is why medical marijuana, gambling, and the adult entertainment industries find it next to impossible to find a credit card processor. Although these industries may be legal in specific states or even counties they still violate federal law.
Credit Card Processing Guidelines: Hurting the Good Guys?
Criminals are becoming increasingly more sophisticated causing credit card fraud and identity theft to continue to rise. This leads to huge losses for banks, business owners, and consumers which leads to tighter restrictions on merchant accounts wishing to accept credit cards. Specifically (and very recently) the FTC has begun focusing on E-Commerce businesses. The FTC now has a group of officials in charge of a taskforce of regulators and law enforcement personnel in charge of monitoring the payment industry including merchant service providers, ISOs, and other merchant services. The days of judging a merchant’s validity solely on their chargeback rate is not sufficient any more and much more thorough underwriting and monitoring practices to protect consumers from credit card fraud and identity theft are now required. Jim Daly has written a detailed article on “The Feds’ Underwriting Crackdown” but in short e-commerce has created loopholes for unscrupulous merchants to defraud consumers. This combined with greedy credit card processing service providers eager to book highly risky merchants, regardless of chargeback percentages, by relaxing underwriting guidelines in exchange for the ability to charge higher rates has led to stricter guidelines.
Experienced Merchant Services Reps are a Must
The unfortunate result is that many legitimate business owners and entrepreneurs starting or running responsible businesses are going to find it much more difficult to obtain a merchant account. Right or wrong, just as business owners have been put on the front line of defense against credit card fraud with the PCI Compliance regulations they now will have to meet ever more escalated underwriting guidelines to establish a merchant account. Simultaneously, the credit card processors have been forced into the position of being the FTC’s watchdogs for unscrupulous and deceptive businesses.
An Experienced merchant services rep can educate and guide your business through the process with minimal time involvement on your behalf. Additionally a seasoned expert will make sure that your business is properly set up so that you will not have any unexpected interruptions in service due to your business being misrepresented in first place. Being able to accept credit cards is critical for most businesses and should be considered one of the most pivotal aspects of your business. From increased sales to decreased liability having a professional on your side is essential.
If your business needs an experienced and diligent credit card processor that will keep your businesses best interests in mind contact the Merchant Doctor. The Merchant Doctor will make the process to accept credit cards a seamless and affordable process. From e-commerce, retail, restaurant, POS, and even mobile phone payment processing we have you covered.