As a business owner, your goal is to naturally look for new methods and opportunities that will help increase sales, profit margins, and revenues to ultimately bring in more money. One of the easiest and most effective ways of achieving this is by simply offering customers more payment options in order to make it easier for them to purchase.


Giving customers the ability to pay for your products or services with credit cards or debit cards, checks, or even direct debit via ACH processing does everyone a service. Customers enjoy the convenience of shopping with so many convenient payment options while merchants in-turn enjoy the customers’ continued loyalty eventually resulting in the goals of greater sales, profit margins, and revenue income.

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Where the Merchant Account Comes In

In order to accept varying types of payments from customers, it’s necessary to establish merchant accounts for each payment option so that you are equipped to process payments whether it’s retail, e-commerce, over the phone, or through the mail. Your merchant account give you a merchant identification or MID. This mid identifies your account to your merchant service provider. When a customer pays for your product or service, the merchant service provider identifies you with this MID and electronically transacts payments to the bank account attached to the merchant account.  At the end of every month you should receive a monthly statement for each merchant account that details sales, transactions, and costs of doing business with your merchant service provider the outlines the rates and fees associated with these costs.


Merchant Service Providers vs. Third Party Processors

You’re likely familiar with PayPal, perhaps you’re even currently using their service. PayPal and similar companies like Square or Google Wallet are also known as third party payment processors. Third party processors are companies that process payments through their own established merchant account, under their own set of risk-adverse terms of service, usually with a set pricing structure that is typically much higher than that of going through a merchant service provider. However, these merchant accounts are slightly easier to set-up but not by much and they more or less function the same as a merchant account. Furthermore, the consumer cannot just pull their credit card out of their wallet and pay. They need to sign up and sign in just to use this payment option making it a much greater inconvenience to any potential customer that does not already have an account with that third party processor. This could steer these customers to other competitors that have a simplified purchasing process. Third party processors do not accept any type of elevated risk so if you are a high risk merchant or are selling a high risk product or service; even if you get approved it won’t last long unless you’ve taken excessive steps to deter detection. If you’ve had to put in this effort to hide; you would save more money, time, and headaches getting a high risk merchant account. The long term risks aren’t worth the short term, unsustainable gain.


Part of the risk reduction implemented with third party processors is they reduce their own risk of chargebacks by holding funds and sometimes even freezing entire customer accounts based on what they consider to be risky or suspicious activity. Such “risky” behavior is often as unwarranted as a boom in sales volume. Take this scary example of a tech company having over $70,000 frozen in their PayPal account following a product launch that led to the a sudden sales increase in the then ten-year-old account.


In stark contrast, a domestic merchant account, even if it’s a high risk merchant account will typically deposit funds into the merchant’s bank account within one to two business days of batching out transactions.


It’s not just the risk of having your account being frozen and having your cashflows severely hampered; third party processors generally have much higher rates and & transaction fees when compared to a merchant account established through a merchant services provider. The rate is a percentage of each sales transaction that a merchant pays for being able to accept the payment through the service provided. On average, PayPal charges 2.70% on card transactions whereas Square charges 2.75%. Contrast that with most merchant service providers and even some e-commerce and high risk merchant accounts are typically one half to one percent less than what third party processors charge.


Most merchants will find that if they compare what it takes, what it costs, and how it functions; they are almost always better served with a merchant account than with a third party processing account. 


Why You Need to Find the Right Merchant Service Provider

Blindly applying for any type of merchant account through any merchant service provider could be compared to blindly applying for a non-secure loan. This means that diving in head first without performing the due diligence to understand who you are going to allow to process your payments could be a merchant account death sentence. Depending on the nature of your business, you could easily be declined by payment processors that simply don’t accept or understand your business model.  Or even worse, dubious middle-men posing as merchant service providers could carelessly force a merchant account approval by setting up your merchant account incorrectly to benefit their short term gains of which the merchant is caught on the short end of the stick because they are eventually, suddenly, and unexpectedly without explanation shutdown. In the worst case scenario, merchants are blacklisted by being placed on MATCH or TMF listings and this is an expensive, time-consuming nightmare for unknowing merchants. More often than not it’s high risk merchants that end up in this sort of situation because they need a high risk merchant service provider and there are only so many trusted sources for these types of merchant accounts.


Merchants can find themselves placed within the high risk merchant category for a wide array of reasons, some of which include:

  • Poor financial position
  • Poor credit position
  • Start-up business
  • Little to no banking history
  • Little to no payment processing history
  • Type of product or service sold
  • Type of Billing model used
  • Providing trial offers
  • Having recurring billing
  • Accepting card-not-present payments

This is why securing a merchant account through a merchant service provider that specializes in your product, service, or industry is extremely important to the long-term viability of your payment processing services. In particular this applies to high risk merchants. Additionally, partnering with a merchant service provider that understands your needs will be able to go beyond what you think you need and make you aware of other potential options such as merchant cash advances or loyalty rewards programs as well as work to provide free or discounted terminals or other point-of-sale hardware if it’s needed.


One particular merchant service provider, Painless Processing, ensures all of their merchants have the necessities and beneficial services so that merchants can focus on what is truly important; operating your business to maximum efficiency and servicing your customers to the best of your ability. They specialize in high risk merchant accounts and have a wide array of services and solutions to meet the most customized necessities. Contact them today to find out how you can benefit from utilizing their merchant services.


High Risk Merchant Account Solutions