Merchant accounts are bank accounts that run separately from your business account and allow you to process card payments, either online or face to face. While they are essential for many, some businesses are unable to obtain them due to a poor credit rating.
What Does a Credit Check Entail?
Because there is a degree of risk to the merchant account provider, credit checks are standard practice for most. A credit check looks at the history of debts amassed, whether these debts were paid and if they were paid on time. The check will include the business, its owner, financial associates and bank accounts, which can be personal, business and joint. The period of time this check will cover varies, but six years is a common time frame.
What to do if you do not Meet the Criteria
If you fail to meet the criteria your options for obtaining a merchant account are somewhat limited. This is not to say you have no options, however. There are many merchant account providers who offer high-risk accounts and are set up to offer support.
Alternatively, some providers don't require credit checks. Businesses who operate exclusively online have more options than most. Companies such as Paypal provide a platform for processing payments regardless of credit history. There are restrictions associated with most of these accounts, such as maximum daily values, and fees can be high, but they do accept the vast majority of businesses who apply.
Fees are the biggest issue facing merchants with poor credit ratings. As the risk to the supplier of the account increases, so does the cost of obtaining and running it. These can be as high as 15% of the value of each transaction, but some providers offer competitive and affordable fees, some as low as 2%.
Providers that do not Require Credit Checks
The more desperate the situation appears, the more likely some disreputable providers seek to take advantage. You should therefore be wary of hidden charges and long contracts that you are unable to get out of. Some of the most reputable merchant account providers that do not require credit checks include:
Paypal are one of the largest online payment providers in the world. They provide a high degree of security and access to 70 million customers across the globe. All you need to access an account is an email address. It is free for your customers to use, and for you to send money, but receiving payment costs anything between 1.9% and 3.4%. There is also a 20p fee per transaction.
NoChex do not even require registration, but your customers are further limited in transaction values when unregistered. This means non-registered customers can only send up to £100 a day and registered users up to £300 per day. This may not be a problem for businesses selling goods and services of low value, but makes NoChex unsuitable for businesses that don't.
One of the most accessible providers available, Durango provide a high level of support for all their customers. This can be vital for startups in particular, who have little experience with merchant accounts. Fees are set quite high, but the service is highly regarded with businesses that use Durango.
Providing flexibility and low fees, Paypoint are particularly well suited to new businesses, rather than those with poor credit ratings. Such flexibility allows their clients to grow without restrictions and low fees mean startups without capital can access the advantages of a merchant account without the crippling costs some providers offer.
The major advantage to using Chronopay, aside from accessibility, is they do not require monthly fees. While such costs may seem affordable at the beginning of a contract, they do put added pressure on businesses within the high-risk market, which are likely to be vulnerable to additional outgoings. They also provide a high level of security, which is free and inherent in the transaction process.
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