Top 5 Reasons For Merchant Account Declines

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Applying for a merchant account or the best online payment gateway can be a daunting experience, especially if this is your first time in the market.

Depending on who you apply to, merchant processors or banks assume risk in order to provide you with merchant processing capabilities, so there is an approval process. The application process assesses you and your business information in order to assess and hopefully reduce their risk.
What is the risk, you might ask? When a business goes bankrupt or has a large number of charge backs (the reversal of funds requested by the customer from your account back to the customer), merchant processors face financial risk and liability. Furthermore, reputable businesses like yours are not the only ones attempting to obtain debit bank accounts and credit cards. It's an obvious opportunity for con artists. So, before forming a partnership, banks and merchant account processors do their homework.

As you go through this process, it will be beneficial to understand the most common reasons why businesses fail to obtain approval and how to avoid those complications in your merchant ...
... account application process.
Top 5 Reasons for Merchant Account Declines:

1. Unfavorable personal credit history or active collection accounts
The personal credit history of the account signer (you, perhaps) is usually checked and influences the approval decision. If you have multiple people who can sign for your company, use the ones you know have good credit. If the company is registered as an LLC or Corporation, the signer for the account must be a person with at least some percentage of ownership, an officer, or someone with a major title.

2. Active tax liens
Personal or commercial tax liens are considered high-risk situations for any processor and will typically halt the process. Before applying for a merchant account, clear any liens.

3. Prohibited business types
Most merchant processors keep a list of industries that they will not serve because they are traditionally high-risk. It is the bank's way of safeguarding its interests. Don't take it personally if you are declined because you are a prohibited business type, but be aware that high-risk business types typically result in higher processing fees charged to the merchant to help cover the risk that the processor is assuming.
If you are in the "high-risk" category and are having difficulty getting approved, do an internet search for "high-risk credit card processor."

4. Type of business does not match processing volumes being requested
Every merchant account application requires the merchant to apply for their expected volumes based on previous processing and future growth. While any processor is excited for your company to grow, processing amounts that are outside of the "norm" for your industry will most likely hurt rather than help your chances of approval.
Make sure to evaluate your business processing amounts based on recent volumes and expected growth over the next 4-6 months in order to develop a realistic, but optimistic figure.

5. Present on the MATCH list
The TMF Match List is similar to a merchant processor's "blacklist." Being on this register means that another bank has closed a merchant account with you, signalling to the banking system that you are a credit risk.

To avoid this complication, ensure that any previous merchant accounts or online payment gateway opened in your name were left in good standing. If you have any outstanding bills or fees owed to a previous provider, make sure you pay them before applying for another account.

Other reasons your name may appear that require more time and involvement to resolve in order to avoid high-risk situations with any processor and maintain your account in good standing:

Provide obvious ways for your customers to contact you
Promptly respond to customer requests
Process within your normal requested volumes

Consider this process to be similar to any other where you are "under review" (think: applying for a loan or a job). Your best bet is to avoid burning bridges, to be as honest as possible, and to do your research before beginning your merchant account application. Use the criteria listed here to tie up loose ends before applying to save time and frustration.

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