Merchant Account 101: Understanding the Application Process

Merchant Account 101: Understanding the Application Process

Experts predict that by 2017, only 23% of a businesss sales will be in cash, which is why you decided there was no better time than the present to start accepting credit card payments. So, you approached a bank or a merchant processor and asked to open a merchant account and they turned you down. You dont know whether to feel scared or insulted. More to the point, you dont understand why they said no. After all, dont they want more business?

Unfortunately, there is no automatic right for a small business owner to be granted an account. Yes, the bank DOES want more business, but it will balance the value of the business against the risk, and if the balance doesnt look good, your application will be rejected.

Here are a few reasons why you mightve been turned down.

Your Credit History

Credit matters. You cant buy a car, purchase a house, rent an apartment or get a cell phone without a credit check. So, if youre credit is a little worse-for-wear, it likely played a contributing role in your application being denied.


If there are several people who are authorized signatories for your business, make sure whoever is listed on the application has good credit. Yes, it can be embarrassing to ask colleagues to fess up about a credit history they might prefer not to discuss, but is that worse than being turned down? Make sure that anyone whose name goes on the form is someone who would be accepted someone with a sensible job title in an your LLC or Corporation, or someone with a stake in the business.

Active Tax Liens

This can directly be linked to your credit history since chances are if you have an active tax lien, its reporting on your credit and hurting your scores more than you may be aware of. Sadly, if you have an active tax lien, youll be viewed as a higher risk than someone without one, which can result in a rejection.


If anyone applying as a signatory for your business has a tax lien, its important to address the situation BEFORE submitting the application. Its entirely too risky otherwise.

Your Business Type

Banks are constantly receiving applications from people whose intentions are fraudulent people who intend to take a customers money and then ride off into the sunset, leaving the bank stuck dealing with the customers demand to be repaid for goods that were never delivered. If you have a business in an industry where this is prevalent, youll be viewed as high risk. Heres a shortlist of types of businesses that often fall into this category:

  • Check cashing services
  • eBay Store
  • Investment strategy
  • Lingerie sales
  • Off-shore corp. establishment services
  • Time-shares or time-shares advertising
  • Weapons of any kind

Theres not much you can do about the type of business you have. Its important to note, however, that there are merchant processors who will service these types of businesses, but their services come at a premium. Their rates are much higher than standard merchant accounts so you will need to take this into account when looking at your pricing strategy.

A Mismatch Between Type Of Business and Processing Volume

When you apply for a merchant account, you will be asked about your businesss sales volume in the past and present, as well as projections for the future. A rate of growth higher than the bank or merchant processor feels is typical in your industry will raise fears that you are involved in money laundering, which is a virtually guaranteed rejection.


Ensure that your bookkeeping is detailed and organized. Equally important is being realistic in your projections for the future. If youre shooting for the moon, youll be viewed as a higher-risk, which as you now know, is never a good thing.

Youre Already Blacklisted

If your name is on the Terminated Merchant File (TMF) List, which was created and is maintained by MasterCard, youve got your work cut out for you. Also known as the Member Alert to Control High-Risk (MATCH) List, this is a blacklist of merchant accounts that have been terminated by a bank or merchant processor. If you are on this list, you will be seen as high risk and wont get the approval youre seeking.


If you have any reason to believe that you may be so listed, or if you owe money to a previous bank or merchant processor, get these problems fixed and talk to the previous bank to ensure that you are in good order with them before attempting to move on.

In an age when paper is dying and plastic is taking over, NOW is the time to start accepting credit cards. If your merchant account application was recently declined or youre concerned that it might be, we hope that this guide has helped to shed some light on things so that when the time is right, youll receive the approval youre seeking.