Business

Why Should Credit Repair Businesses Get High-Risk Merchant Accounts?

Credit scores play a crucial role in a merchant’s ability to get funding. Bad credit is increasing rapidly in today’s market. The prevalence of poor credit is a part of the reason behind so many credit card companies. As per IBIS World reports, more than 90,000 credit repair companies are currently available in the USA, creating a 4 billion dollar industry.

Business owners with low credit scores may consider themselves locked out of some of the best funding sources. Since the Covid-19 pandemic, people are trusting their credit amid an increasing trend in fraud and identity theft.

Despite the large number of businesses operating in the U.S. today, the industry is considered high-risk when it arrives in the merchant services like credit card processing. If you are searching ‘high risk merchant account credit repair’ on Google, this article will explain why credit repair businesses need high-risk merchant accounts.

What Does A High-Risk Merchant Mean?

We can consider high-risk merchants based on the industries they serve, such as credit repair services. Apart from this, numerous factors can cause a business to be considered high-risk:

  • High transaction volume: A payment processing platform may consider a merchant as high risk if there is a high volume of transactions or if they have a high transaction rate. If the merchant has an average transaction of $500 or processes more than $20000 transactions per month, they are considered high-risk merchants.
  • New merchant: If the merchants have never faced any payment or have a minimum history of processing transactions, they are considered high risk if they do not process a track record.
  • Accepting international payments: If a merchant delivers products that are at a high risk of fraud to people in other countries, such a merchant can be termed high-risk.
  • High-risk industry: We can also consider a merchant at high risk if they are working in an industry at a higher risk of fraud, chargebacks, or returns. Subscription-based companies are called high-risk because most people sign up for a trial and disremember to cancel the payments. When they observe the statements and find the forgotten charges, they often charge back the payment.
  • Low credit score: The merchant can also be called high-risk if they have a low credit score.

Once considered a high-risk merchant, the businesses face a higher risk of being turned down by high-risk service providers, substantial cash reserve requirements, the potential for higher fees, and the no. of transactions they can process per month.

Why Do Credit Repair Businesses Require A High-Risk Merchant Account?

Customers having poor credits are risky customers in the eyes of banks. As per banks or financial institutes, those customers are not so reliable in paying their debts. If you are a credit repair business owner, those customers are also your customers. This fact can make any credit repair industry a high-risk one. Banks or other financial institutions identify the credit repair business as prone to fraud and chargebacks. 

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Numerous factors influence a merchant service provider’s decision to consider a business or company at high risk. Following are some of the factors that can contribute to the reluctance of a payment processor to get involved with credit card repair businesses:

  • Credit repair businesses offer high-ticket services, generally $600 or above. They also provide many services on recurring billing plans. These factors make credit repair businesses open to friendly fraud and increase the risk of chargebacks.
  • These businesses accept payments via gateways, online, or by mobile, rather than in person, and increase fraud risks.
  • Credit repair businesses deal with people who are dishonest and are often cash-strapped. These people may look for techniques to hold on to the funds by disputing credit card transactions.

Many popular third-party processors are available such as Stripe, PayPal, and Square, as are many competitive merchant account service providers. Instead, credit repair businesses will have to look at high-risk merchant services providers to get credit repair merchant accounts.

Types Of Businesses Available In The Credit Repair Industry

Following are the types of businesses present in the credit repair industry. Merchant service providers may consider those businesses as high-risk.

  • Credit re-establishment businesses
  • Settlement assistance firms
  • Credit repair consultation businesses
  • Desist collections processing businesses

All of these businesses face higher risks of disputes and chargebacks. It leaves some merchant service providers to deal with credit repair businesses. Fortunately, there are options available to credit repair businesses in high-risk credit card processing. 

Bottom Line

Being in a high-risk industry like credit repair may lower the merchant account options. The service that appears to provide the cheapest merchant account for credit repair business can not really offer the best value for money with tiered pricing. Among high-risk merchant accounts, reputable and good providers are available to benefit the desperate business. 

Huynh Nguyen

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