Why Do Collection Agencies Find It Hard To Receive High Risk Merchant Account Services? |
Posted: December 17, 2015 |
Running a collection agency is definitely a business that can be incredibly profitable. However, many extras are needed to make everything successful. The high risk merchant account is always a necessity that should not be neglected. You want to offer people the possibility of making credit card payments. Most of the people that run collection agencies do not understand why it is so difficult to secure the high-risk merchant account. This can be due to various different reasons. The huge problem is that there are not many processors that will agree to working with a collection agency due to the high volatility of the market. Banks will surely not see the agencies with good eyes and are opposed to servicing such a business model. The High Risk Nature Of The Business Banks do not want to work with the collection agencies because there is high risk of being dealt with really high chargebacks. At the same time, we are faced with really big standard transaction fees. To make matters even more complicated, we are looking at regulations that are imposed when referring to any debt related service. The business is restricted and needs to work hard in order to maintain stability. Account providers do not like to see that. What Can The Collection Agency Do? One of the biggest problems with people that want to start a collection agency is that they do not truly understand the risk that is associated with the business model and the truly high risk that is involved. Make sure that you first understand what you have to do for the business to be successful and start operations as soon as possible to be able to prove that you can successfully manage everything. Never deal with banks or regular financial institutions as you are looking for gaining a high risk merchant account. They will never accept a collection agency. You want to work with those merchant account providers that are specialized in dealing with account holders working in high risk industries. They will have really strict guidelines that would have to be respected in order for high risk businesses to be accommodated. Understand The Tradeoff Obviously, because of the fact that you would be offered a high risk merchant account as a collection agency, you would be faced with tradeoffs that have to be understood. As the risk status is not ideal, the terms and conditions that have to be agreed are stricter. The processing rates are higher and account providers specialized in dealing with high risk industries deal with them only because of the fact that they manage to get more money. Higher fees are needed in order to protect their business from losses. The main thing that you have to do is understand every single fact that is associated with the business account you will receive. Make sure that the extra fees are suitable for the business model you have at the moment. If you do this, you will make a great decision.
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