Every day we get an influx of telephone calls and e-mails about our solutions for credit card processing for high risk businesses. It’s what we do, and it’s good to know we’re generating the amount of leads that we do.
Out of nowhere, we’ve been receiving quite a barrage of inquiries about credit repair merchant accounts. That leads us to believe that within the last few days, a bank somewhere has decided to cease credit card processing for that industry, and credit repair merchants are scrambling, looking for viable payment solutions. We saw this happen four years ago with online pharmaceutical merchants in Canada, whose banking privileges were abruptly given a 30-day notice, causing them to frantically contact other high risk payment processors for solutions.
If you’re a high risk merchant or payment processor who feels that banks are increasingly shunning high risk industries, you may be right. The influx of contact from credit repair merchants is somewhat symbolic of the state of the industry.
Why is credit repair considered high risk?
There are two primary reasons credit repair businesses are deemed high risk by acquiring banks:
- A typically high rate of chargebacks
- Merchants exceeding volume caps
Consumers turn to credit repair merchants to improve their credit score. Most consumers who seek credit repair services are considered high risk clients with bad credit; are likely in financial disarray themselves; and don’t have very much money.
Credit repair agencies are expensive and known for making promises such as improving your credit score substantially and quickly. They do this by looking for errors and unfair reasons why a customer’s credit score dropped, then disputing and negotiating with the proper credit reporting officials to have items removed from a consumer’s credit report. Most agencies perform several services, such as negotiating down debt with creditors and offering advice and framework on building and maintaining credit.
However, this is where credit repair merchants encounter trouble: On the occasions when the customer pays with a credit card and is dissatisfied with the results by the merchant – which happens often – the customer will file a chargeback. Other reasons for chargebacks include:
- Credit repair isn’t cheap, which, when dealing with high risk customers, enhances the chances of a chargeback.
- Many agencies are small and lack customer support resources, leaving customers impatient.
Moreover, credit repair merchants are always assessed a volume cap which cannot be exceeded. Unfortunately, many merchants do. With solid processing and low chargebacks, however, volume limits are negotiable after 3-6 months.
Why acquiring banks are turning down credit repair
In recent years, we’ve seen acquiring banks shun credit card processing for high risk businesses, particularly credit repair agencies. They simply do not want to assume the level of risk such businesses have.
Think about it: A credit repair business accepting credit card payments from clients who are trying to repair their own credit. Such a premise borders on the contradictory. Nevertheless, we find the vast majority of credit repair merchants prefer credit card payments for such – not check solutions or cash.
We understand the merchant’s side: accepting credit card payments for credit repair is easy guaranteed payment for the merchant (even if it may be putting the customer further into debt). Cash and check solutions, though more practical (and financially sensible) for the customer, do not guarantee a steady stream of income.
Solutions for credit repair merchants
Credit card processing for high risk businesses, particularly credit repair, has become exceedingly difficult due to the large credit card issuers collective diminishing tolerance for chargebacks.
Instabill has credit card processing solutions for many high risk businesses. For credit repair, there is a strict checklist of requirements:
- Our solution is for domestic merchants operating in the U.S. only
- 3 months of processing history (no startups) with documentation
- 3 months of bank statements
- Chargeback rate below the standard Visa threshold: less than 1 percent of sales or 100 per month
For merchants seeking a credit repair merchant account using check solutions and ACH, Instabill can offer stellar solutions and fast approvals. Regardless, we are always up for a discussion with like-minded merchants about payment processing possibilities. Speak one-on-one with a live merchant account manager at 1-800-530-2444.
