A bad credit merchant account, otherwise known as a high risk merchant account, is basically an option for an online business who is classed as “high risk” by a financial institution. If your business is designated as such it can have a significant impact on your viability, as many banks will not allow you to open an account or even if they do, they might have very strict regulations that will not allow you to enjoy the same benefits as a business they deem without risk, or low risk.
What businesses can get a bad credit merchant account?
Another factor that is important in determining whether your business is high risk or not is whether it is a startup or not. Businesses that are just starting out are not yet trusted by the credit system and a few months need to pass before they can get better rates at banks or benefit from a better payment plan for their merchant account. There are usually 3-tiered payment plans when a business sets up an account, and a bad credit merchant account will often suffer from the tier that makes them pay the most in fees. Additionally, there may be other nuisance and administration fees involved that could increase the costs.
Additionally, businesses that have had issues with their credit rating in the past might also benefit from a bad credit merchant account. If a business has been the victim of online fraud before or identity theft, or even if the business has had financial difficulties before and problems with paying off debts in time, then they might get a bad credit rating.
Also, there are actually businesses that are classed as high risk ones because of the nature of their products and services. Some examples of these are:
- adult oriented businesses
- dating services
- insurance companies
- online gambling/lotteries
- home shopping networks
- travel businesses
In particular, if you look at a business such as a travel agency, then you will quickly realize why they might have to take advantage of a bad credit merchant account. There are many extra overhead fees and costs to be taken into account in a business like this. It can be high risk because they offer lower rates on airline tickets if they are booked well in advance. Often these tickets cannot be refunded if a client changes their mind and then the businesses compete by offering their own refunds. If this happens too many times, then the business can suffer greatly.
As travel is also dependent on political and international events, there are many situations where the travel or tourism industry suffers as a whole — such as natural disasters, terrorist attacks and so on. It should not be surprising that a business like this is considered high risk and it is more difficult to obtain a merchant account for one.
What bad credit merchant account options are there?
These businesses would benefit greatly from looking at options such as offshore merchant accounts. These merchant accounts are based in countries other than the home country and often allow great advantages, in particular:
Tax benefits — offshore countries often have better tax rates than domestic. You stand to save a lot if you look into opening an offshore bad credit merchant account.
Lower rates and fees — offshore accounts tend to offer better rates and fees to attract customers.
Instant online verification and access to your money anywhere — one of the biggest advantages to getting an online bad credit merchant account is simply that you have access to the payments your clients make virtually instantly, while with a bank this process can often take several days or even a week.
Description: A bad credit merchant account is a good idea for a business that has been deemed as “high risk”. Read on to find out more about the various options available.
