5 Reasons Why Your Merchant Account Application Was Denied

Processors Don’t Want To Tell You No

© Depositphotos – Vitaliy Kytayko
Make no mistake: credit card processors want nothing more than to approve your merchant account application. From the sales agent to the underwriting department to the acquiring bank, every single person you interact with is trying to activate your account as soon as possible so that they can begin to collect a percentage of your credit card sales. Payment processors get no satisfaction out of denying your application; if anything, they waste more time and money on a failed application than you do.

As a result, it takes a lot for a merchant account provider to tell you no. It can feel insulting when you get denied—after all, who are they to turn down your business?—but providers often make this decision because they get the wrong impression of your company. To help you spot potential red flags that are forcing processors to turn you down, we’ve compiled the following list of five reasons why your merchant application was denied. If you’ve been told no by a credit card processor, the odds are very good that one of the following items is the main cause. And if you want to get approved in the future, you should read on and start thinking about how to avoid these common approval pitfalls on future applications.

You have poor personal credit.

Credit card processing is ultimately a division of the banking industry, where credit scores are still king. When processors evaluate your business, they want to see that it’s stable, legal, and a reliable source of income for you and them in the long run. A bad personal credit history can scare them away, especially if you have a long history of unpaid debt or failed business ventures.

If you think your personal credit history is getting you turned down, you should consider letting another owner of your business with better credit sign the application instead. Processors may also be interested in securing a personal guarantee or a large cash reserve from you as collateral to prevent you from disappearing with fraudulent earnings and leaving them on the hook. If none of these options are available to you, then you might also consider contacting a provider from our list of the best merchant account providers for bad credit.

Your business is in a high risk industry.

This is a very common reason for denial. The fact of the matter is that some industries (specifically card-not-present industries) attract a large amount of consumer fraud, which means that the businesses operating in those industries are statistically more likely to suffer from chargebacks. Credit card processors prefer to avoid processing chargebacks because they leave processors temporarily exposed to huge financial losses if they are unable to recover the chargeback amount from the merchant. In addition, federal regulators are beginning to sanction processors that knowingly facilitate fraudulent payments, and high chargeback rates are a classic indicator of fraud.

Your business can be well-established, completely legal, and highly profitable, and it still won’t change the fact that it is technically high risk. If your merchant account application has been denied because your business is high risk, you will likely need to agree to stricter contract terms such as higher rates, larger monthly fees, a cash reserve, a personal guaranty, and extra documentation such as a photograph of your location and sensitive financial information. You likely will also need to seek out a dedicated high risk merchant account provider. Standard merchant account providers actively discourage certain high risk industries from applying because they simply don’t have the banking relationships or risk tolerance to serve them. High risk providers, on the other hand, specialize in finding creative and reliable ways to process payments for high risk business types. To begin your search, you should consult our list of the best high risk merchant account providers.

Your description of your business doesn’t add up.

When you fill out a merchant account application, you are describing your business to total strangers and predicting what your processing needs will be in the future. You’re also giving those strangers an intimate look at your business’s existing financials. When these two components do not match each other, there is a high chance that your application will be denied.

There are two major warning signs that underwriters look for when it comes to your sales figures. One is a discrepancy between your business type and your sales volume. If you claim that you’re selling handmade combs part-time and you list your average ticket size as $200 and your monthly sales volume as $100,000, your application will raise some eyebrows. The processor will wonder if you are misrepresenting your business type to cover for criminal activity. You can avoid this by being honest about what you sell and ensuring that your business description is as accurate as possible.

The other common warning sign is a request for an unreasonably high processing limit. If your business is earning about $10,000 per month but you request a processing limit of $100,000 per month, then your processor might be hesitant to give you such a large line of credit. To avoid this possibility, you should work closely with your sales agent to set an appropriate limit that guarantees approval without stifling your cash flow. You can always increase your limit at a later date after you have established a need for it. Our list of the best merchant accounts for high volume merchants is a good starting place if you have a need for high transaction limits.

Your business has a bad public reputation.

In addition to a deep dive on your business’s financial information, processors will also take a look at your public-facing materials such as websites, advertisements, and social media presence. They do this to compare your public image to the way you represented yourself on your application and to find any negative customer feedback that could reveal you to be a scammer. If your business has lots of negative reviews from customers, a track record of poor customer service, or an advertising approach that is obviously deceptive, then you could be turned down for an account.

It might seem impossible to control what people say about your business online, but the truth is that you actually have several ways to maintain a solid reputation. Pay attention to the sales techniques you use to ensure that they don’t come across as scammy. Encourage customers to contact you for any issues they may have, and reach out in public venues to demonstrate that you aren’t leaving dissatisfied buyers behind. If you have reformed your business practices but can’t seem to shake bad ratings, there are also a number of third-party reputation management services that can help you improve your online presence. A bad impression of your public profiles is not usually enough to get your application denied, but it can be a contributing factor if other issues are also hurting you.

Your business is on the TMF/MATCH list.

This is the quickest way to get your application denied, as well as the most difficult to fix once it happens to you. The credit card processing industry maintains a private blacklist of merchants who have previously had their accounts terminated or declined, called the Terminated Merchant File (TMF) or Member Alert to Control High-Risk (MATCH) list. Your processor can place you on the TMF unilaterally if it determines that you have engaged in fraud, racked up too many chargebacks, or otherwise committed an egregious violation of payment processing rules. You may not always be notified if you’ve been placed on the TMF, but any processors who you apply to in the next five years will be able to find you on that list, and will likely turn you down.

The only way to get off of the TMF is to contact the acquiring bank that put you on it, find out what you did to get placed on it, and ask what you need to do to get taken off of it. Because this is an internal industry list, the bank can judge for itself whether to remove you from the list, and it may not offer you this option at all. If your previous bank refuses to remove you from the MATCH list, you have two choices: wait five years until you are automatically removed, or work with a high risk merchant account provider that is willing to process for MATCH merchants. If you opt for the latter, our list of the best TMF/MATCH merchant accounts is a great place to start.


Don’t Give Up

Whatever the reason for your merchant account denials, you should still be able to open a merchant account as long as your business operates legally. You’ll need to be patient as you hunt for options—especially if your business falls within an industry on the very fringe of legality, such as marijuana products or online dating—but there is bound to be at least one credit card processor willing to take a chance on making money with you. The credit card processing industry changes every single day, but it’s up to you to make sure that your business is ready when the opportunity appears.

Have you been denied for a merchant account due to a reason not listed above? Describe your experience in the comment section below this review.

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Why I'm Qualified to Write About Credit Card Processing and Merchant Account Services

I'm a former credit card processing sales director who left the industry because I didn't like how it takes advantage of small business owners. It feeds like a leech on businesses and thrives by imposing fees that are nearly impossible to comprehend. Seeing a need for change, I left and built this website help business owners better understand the industry, research merchant services providers, and get refunds of excessive merchant account fees. My experience of working "behind the curtain" in the industry, and using that knowledge for good, has resulted in millions of dollars returned to hard-working small business owners as well as enterprise-level companies.

From the time that I starting working in the merchant services industry to when I left to create this website, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this "insider" knowledge to myself. To lift the fog, I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers on this website.

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