For many, applying for a high risk merchant account is something you have to do but you know nothing about.  Where do you start?  Who can you rely on?  Who is the best company most capable of meeting the needs of my business?  What is it going to cost me?  They are all great questions.  In order to find out the answers there are six questions you should be able to ask any reputable high risk merchant service provider and get straight-forward answers that allow you to make the best payment processing decisions for your business and your pocket.           


What are my costs for a merchant account through your company?

It’s an obvious question because you want to know what you are going to pay for opening a merchant account with a particular payment processor.  However, costs associated with payment processing go beyond the discount rate and per transaction fee.  There can be setup or registration fees, chargeback or verification fees, network fees, monthly minimums as well as gateway costs and fees or even other miscellaneous fees.  Some of these additional fees are required as part of interchange costs and do not have a great impact on your costs of doing business, but it still makes sense to know what you have to pay. Most, if not all, of these costs will be on your application; however, you want to make sure that they match what you’ve been told and if you’re unsure of something simply ask your merchant service provider.  If they won’t provide full-disclosure, it’s in the merchant’s best interest to move on to another provider. 


Is there anything else I need besides an application?

When applying for a high risk merchant account you will go through a more thorough underwriting process that will require you to provide documentation and information to support your application requests.  These supporting necessities can vary depending of factors relating to your specific business.  Your merchant service provider can tell you the majority, if not all, of the items your will need to provide.  There are times when underwriting will come back and ask for more of something until they are satisfied with the information they have received.  Don’t get frustrated; it’s part of the process and it happens more often than you think.


What terminal, point of sale system, or gateway do I need?

The type of merchant account you need and how your business is conducted will determine what hardware or software you will need.  Retail locations will need one or multiple terminals or point of sale systems.  Terminals range in functionality and use while POS systems are scalable to meet the needs of the business.  E-commerce businesses use a compatible gateway that integrates with their shopping cart.  Mail order and telephone order (MOTO) businesses also use gateway but in this instance we call it a virtual terminal and payment transactions are manually keyed into that gateway.  Mobil businesses simply use a mobile swipe terminal that plugs into a smart device.  Many businesses today need a mix of these products.  Depending on your position you can negotiate cheaper or even free product.  Discussing your options with your merchant service provider should give you a relatively good idea of what options you have for your business.


Are there any reserves or cap limits with this merchant account?

Reserves are typically only associated with high risk merchant accounts.  They are taken as a percentage of your total monthly processing and are withheld by the bank to leverage against the risk associated with your high risk merchant account.  Reserves are usually held for the lifetime of the merchant account and can be held for more than six months after a merchant account is closed depending on the reasons why the account was closed and the history associated with the account.  There also are rolling reserves that typically release funds held six months in arrears.  Reserves are usually not required; however, sometimes they are unavoidable based on circumstances surrounding your specific situation.  If you should require a reserve, you can usually have it reduced or eliminated within four to six months’ time as long as you process clean.  Processing clean means zero chargebacks every single month.  Many times a need for a reserve is determined during the underwriting process so your merchant service provider may not be able to tell you up front, but they should acknowledge that they are willing to work with you to reduce or eliminate that reserve in a few months’ time. 


There could be other caps or limits to your account and you should be aware of them.  Some of those limits such as monthly dollar volume and high ticket limit are established on your merchant account application but could change upon approval.  Knowing these limits can help to avoid potential processing issues stemming from simply being unaware of these limitations.  You can request to raise these limits if you feel you could exceed them.  Make sure you put in those requests before you cross those thresholds.


How long does it take for funds to settle into my bank account?

Settlement time can vary amongst payment processors.  However, most settlements should occur within one to two banking days for domestic high risk merchant accounts.  Offshore merchant account settlement times can vary from a few days up to a couple weeks.  There are circumstances that could delay funds from settling.  For example, the sponsoring bank can flag a transaction for suspicious activity because it exceeds any of the approved limits such as high ticket, monthly volume, or even how the transaction is conducted.  They can hold funds for an extended period of time to assure they are not fraudulent.  In the case of chargebacks, funds can be held until the chargeback case is resolved. Your merchant service provider will be able to tell you what type of settlement times to expect.


What other payment processing options do I have?

Let’s face it, not everyone gets approved when it comes to high risk merchant accounts.  Thankfully, payment processing options for high risk merchants go well beyond getting a high risk merchant account.  Solutions such as ACH processing, electronic check processing, cashless ATM’s, merchant cash advances and other solutions are available to high risk merchants.  It makes sense to ask your merchant service provider what other options you have as you may realize that one of those solutions make more sense to have instead of or combined with a merchant account.  They could also be a secondary option should you not get approved for a merchant account.


It’s better to know.

Ask these questions and more to make sure you understand what you are getting in return for allowing a merchant service provider to handle your payment transactions.  After all, it is your business and there is no reason to be left in the dark.  We believe in providing straight-forward, full disclosure answers at Painless Processing. How else would we make payment processing so easy… it’s Painless?