How To Get A Good Deal On A Merchant Account With Bad Credit

If you’ve been turned down for a merchant account because of bad credit, don’t panic. Here’s what you need to know about the role credit scores play in payment processing.

• Frank Kehl Frank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.

  Expert Analyst & Reviewer

• 
  Oct 12, 2021

  UPDATED

First-time business owners face a host of challenges in getting their businesses up and running, but few of those challenges can be as daunting as getting approved for a merchant account if you’ve experienced bankruptcy or have a low personal credit score. While most run-of-the-mill businesses will be classified as low-risk and have few problems in getting approved for one of the best credit card processing companies, there are a variety of special factors that can get you placed as high-risk. Don’t know if you qualify as high-risk? Check out our guide on which businesses are considered high-risk.

High-risk businesses have a particularly hard time finding a compatible merchant services provider, as many popular providers simply won’t accept them at all.

Fortunately, there are a fair number of companies that specialize in working with the high-risk community and can help you get a merchant account. We’ll warn you upfront that it will cost you more. Be prepared to pay significantly higher processing rates and account maintenance fees, and also accept the fact that you’ll most likely have to agree to a long-term contract. Nonetheless, working with a high-risk specialist can be very beneficial to the success of your business, especially since they’re often the way for you to be able to accept credit and debit card payments from your customers, rather than operating on a cash-only basis.

In this article, we’ll explain what bad credit merchant accounts are and give you an overview of the top providers who offer them. We’ll also give you a quick primer on the factors that affect your credit score and go over some tips on how to select the best bad credit merchant account provider for your business.

Learn More About Our Top Picks

Company	Summary	Next StepsSummary
Read More	PaymentCloud specializes in providing payment processing solutions for eCommerce, mail order/telephone order (MOTO), and other generally high-risk businesses. They stand out by taking a hands-on approach during the initial application and underwriting process, and they provide intensive follow-up support and advocacy to existing clients.	PaymentCloud specializes in providing payment processing solutions for eCommerce, mail order/telephone order (MOTO), and other generally high-risk businesses. They stand out by taking a hands-on approach during the initial application and underwriting process, and they provide intensive follow-up support and advocacy to existing clients. Visit Site Read More
Read More	Durango Merchant Services offers fair pricing in a segment of the market that’s notorious for charging highly-inflated prices. They specifically market to bad credit merchant accounts. The company also has above-average customer service and an honest, knowledgeable sales team.	Durango Merchant Services offers fair pricing in a segment of the market that’s notorious for charging highly-inflated prices. They specifically market to bad credit merchant accounts. The company also has above-average customer service and an honest, knowledgeable sales team. Visit Site Read More
Read More	Soar Payments is a highly-rated high-risk specialist that can accept bad credit merchants. The company is best known for using automated processes to streamline the application and account approval process, allowing you to get up and running quickly.	Soar Payments is a highly-rated high-risk specialist that can accept bad credit merchants. The company is best known for using automated processes to streamline the application and account approval process, allowing you to get up and running quickly. Visit Site Read More
Read More	eMerchant Broker's strongest point is that it can often get you approved for a high-risk account even if you've been turned down by other providers. The trade-off is that it's also known for being more expensive than other high-risk providers.	eMerchant Broker's strongest point is that it can often get you approved for a high-risk account even if you've been turned down by other providers. The trade-off is that it's also known for being more expensive than other high-risk providers. Visit Site Read More
Read More	PayKings is a relatively new high-risk provider that can accept bad credit merchants. It offers a full range of products and services, including ACH & eCheck processing and multi-currency processing.	PayKings is a relatively new high-risk provider that can accept bad credit merchants. It offers a full range of products and services, including ACH & eCheck processing and multi-currency processing. Visit Site Read More
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What Is A Bad Credit Merchant Account?

A bad credit merchant account is simply a merchant account that has been issued to a business owner who has a low personal credit score or a previous bankruptcy. Bad credit merchant accounts are considered “high-risk,” and so they are significantly more expensive than low-risk accounts.

What Kinds Of Merchants Need A Bad Credit Merchant Account?

Getting approved for a merchant account is very similar to getting approved for a loan in that banks don’t want to extend credit to you if they have reason to think that there’s a significant chance that you won’t be able to pay the money back. Every merchant account provider has a slightly different definition of what they consider to be a “bad credit merchant.” However, as a general rule, you will most likely be labeled as a bad credit merchant if any of the following situations apply to you:

• Low Personal Credit Score: If your FICO score is 580 or less, you can expect to be placed in the bad credit category. This situation mainly applies to first-time business owners, because the banks won’t have an established business record to examine in making their determination.
• Prior Bankruptcy: If you’ve had a prior business endeavor end in bankruptcy, or you’ve had to file a personal bankruptcy, you will almost certainly be placed in the bad credit category (learn how to improve your business credit). Bankruptcies stay on your credit report for either seven years (if filed under Chapter 13) or ten years (if filed under Chapter 7), so it can be a long wait before you can switch to a low-risk merchant account.
• Outstanding Liens: Liens on your property can negatively affect your credit score and put you in the bad credit merchant category. Banks will, however, evaluate the circumstances of the lien in determining whether to hold it against you. For example, a lien filed against your property by the IRS for unpaid taxes would certainly hurt your chances of getting approved for an account. A lien filed by a lender as collateral because you took out a loan to finance installing solar panels on your roof, however, would probably not hurt your score as long as you were making regular payments on the loan.
• Outstanding Judgments: While this won’t apply to most people, an outstanding judgment imposed by a civil or criminal court would have a significant negative impact on your creditworthiness until it has been paid.

5 Best Bad Credit Merchant Accounts

Bad credit merchant accounts can be obtained from just about any provider that specializes in high-risk accounts. Contract terms, processing rates, and account fees vary widely for each business, so be prepared to negotiate. Also, be aware that the criteria for being labeled a bad credit merchant varies somewhat between different providers.

Here’s a brief overview of five of the best merchant account providers we’ve found that will work with you if you’re a bad credit merchant:

1. PaymentCloud

PaymentCloud	Visit Site Read our Review

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2. Durango Merchant Services

Durango Merchant Services	Visit Site Read our Review

Get Started With Durango Merchant Services

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3. Soar Payments

Soar Payments	Visit Site Read our Review

Get Started With Soar Payments

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4. eMerchant Broker

eMerchantBroker	Visit Site Read our Review

Get Started With eMerchantBroker

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5. PayKings

PayKings	Visit Site Read our Review

Get Started With PayKings

Read our in-depth review

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Can You Get A Merchant Account With No Credit Check?

If a low personal credit score is the only thing standing between you and your business being able to accept credit cards, you might naturally want to know if there’s any other way to get approved for a merchant account – i.e., one that doesn’t involve a credit check. The short answer is no, but there’s more to the story than just that. The process of approving your application for an account will depend primarily on whether you’re applying for a full-service merchant account or a simpler account with a payment service provider (i.e., Square, PayPal, etc.).

Credit Checks With Merchant Accounts

Applying for a true, full-service merchant account is a lengthy, paperwork-intensive process that’s not all that much different than applying for a mortgage. Your provider (and possibly their backend processor) will want to know as much about you and your business as possible before they’ll agree to give you an account. This process can take anywhere from a few days to two weeks or even longer, and will inevitably include a check of your personal credit. However, your credit score will only be weighed more heavily if you’re a first-time business owner. It won’t count as much for experienced merchants who can show a proven record of successfully running a business. The advantage of this approach is that once your merchant account is established, it will be very stable, and your likelihood of experiencing a sudden account freeze or termination once you start processing should be very low.

Credit Checks With Payment Service Providers

Payment service providers (PSPs) such as Square, PayPal, or Stripe offer an easy way for businesses to start accepting credit and debit card payments without a full-service merchant account. These companies operate by aggregating all their users into a single, very large merchant account. Unlike full-service merchant account providers, the application and account approval process is very abbreviated. In most cases, you can apply online and receive approval to start processing in 24 hours or less. This quick approval procedure skips the usual underwriting process, and usually does not involve a personal credit check. However, PSPs are very quick to shut down your account at the slightest sign of any out-of-the-ordinary activity. As long as you work in a low-risk industry and maintain a low chargeback rate, most PSPs won’t hold your low personal credit score against you. However, if you experience a lot of chargebacks or operate in a typically high-risk industry (e.g., adult entertainment, CBD products, vape shops, etc.), it’s only a matter of time before your account gets shut down.

Why Instant Merchant Accounts With No Credit Check Are A Bad Idea

The popularity of the quick approval process used by payment service providers has encouraged some traditional merchant account providers to also offer so-called “instant approval” as a feature of their merchant accounts. (Read our Instant Approval Merchant Account Guide.) Capitalizing on the frustration merchants experience while waiting for their account to be approved, these providers will collect some basic information about your business (often through an online form) and approve your account without going through the detailed underwriting process first. The problem with this approach, as with PSPs, is that you’ll be at a far greater risk of suddenly having your account terminated after you start using it if your processor flags any transaction as suspicious. To make matters worse, your provider might also place you on the Terminated Merchant File (TMF, or MATCH List) when it closes your account. Unfortunately, being on the MATCH List and having a bad credit score can make it nearly impossible to get approved for an account with a different provider.

How To Get A Merchant Account With Bad Credit

The process of getting a merchant account if you have bad credit is basically the same as it is for merchants with good credit. However, your choice of available providers who are willing to work with you is going to be much more limited. Here’s a brief overview of the process, along with some tips to help you out:

• Research as many providers as possible that specifically work with bad credit merchants, ensuring that they offer the products and services you’ll need.
• Obtain quotes from several of the most promising candidates (we recommend getting at least three quotes, if possible).
• Negotiate with the best candidate to ensure that you’re getting the best deal possible. This is where you can (hopefully) get a discount on your processing rates or a waiver of your early termination fee, if there is one.
• Submit an application and all required information about your business. Be prepared to sit and wait while your application is being processed.
• If you’re approved, carefully review all contract documents before accepting the offer and signing up. If you’re not approved, move on to the next promising candidate and repeat the process.

6 Essential Pieces of Information For Your High-Risk Merchant Account Application

As a bad credit merchant, your chances of being turned down for a merchant account can be unnervingly high. You can – and should – expect to have to repeat the application process with more than one provider before you find one that will accept you. The best online payment processors don’t tend to cater to bad credit merchants, so you may have to dig deeper. To make this process a little easier, we recommend that you assemble a package of documents that providers will want to see as part of their onboarding process before you submit any applications. While each provider will have a different set of paperwork requirements, the following information will almost always be required:

• Business license documentation
• Business incorporation documents
• Bank statements
• Processing statements from previous providers, if any
• Links to your business website(s), showing clear published return/refund policies
• Information on previous chargeback history

Common Trade-Offs In Merchant Accounts For Bad Credit

So far, we’ve shown you how to get a merchant account even if you have bad credit and have been turned down by other providers because of it. Now for the not-so-great news: like any other high-risk merchant account, your account is going to be more expensive and have more restrictions placed on it than a comparable low-risk merchant would have to accept. Here are the ways in which your account will differ from a typical low-risk account:

• Higher Processing Rates: Most high-risk providers can only offer you a tiered pricing plan, which is generally more expensive than other options. While a few providers can set you up with a more affordable interchange-plus pricing plan, you should generally expect to pay rates that are about two times higher than the industry average for low-risk businesses.
• Higher Account Fees: So-called “hidden” fees are the bane of any small business trying to keep its credit card processing costs under control. However, as a bad credit merchant, you can expect to pay a premium for some (but not all) of these fees. Monthly account fees are frequently much higher than average, but you have some leeway to negotiate this fee when setting up your account. Be sure to review your contract documents carefully to determine which fees you’ll be responsible for, and how much they’ll cost you.
• Long-Term Contract: Low-risk providers are increasingly moving toward a month-to-month billing model due to market pressure and complaints from merchants. Unfortunately, this enlightened approach rarely extends to high-risk merchants. Be prepared to have to accept an industry-standard contract with an initial term of three years, an automatic renewal clause, and an early termination fee if you break your contract.
• Monthly Processing Volume Limitations: High-risk merchant accounts typically come with caps on the maximum amount you can process in a month. If you exceed this amount without coordinating in advance with your provider, you could see your account suddenly frozen until the end of the current billing cycle. Note that once you’ve been with a provider for a while, you can often negotiate an increase in the size of your monthly processing volume limit, if you need it.
• Reserves: One of the most draconian restrictions on high-risk merchant accounts is the imposition of a reserve (sometimes called a “rolling reserve,” depending on how it’s structured). With a reserve, your provider will withhold a specified percentage of the funds from your transactions for a certain amount of time as a hedge against possible chargebacks. These funds will be released back to you over time, and you’ll eventually get all of your money back. Once you’ve met the conditions of the reserve, it’s usually lifted automatically. However, reserves can create serious cash flow problems, especially for a new business. It’s critically important that you understand exactly how your reserve works and take steps to minimize the problems it can create for your business.

Getting A Bad Credit Merchant Account Isn’t Easy, But It Is Possible

Credit is a fluid thing. You can turn good credit to bad and bad credit to good, all in a span of a few years. When you apply the concept of evolving credit scores to a new business, understand that while your business’s credit will at first rely heavily on your personal credit, as your business continues to grow, its credit score will eventually stand on its own. Even if your business and personal credit scores are less than stellar in the beginning, they won’t last forever.

As a bad credit merchant, you have a unique advantage over business owners who work in an inherently high-risk industry, in that you can improve your business’s credit score over time. Eventually, you can qualify for a low-risk account that will save you a lot of money in credit card processing costs. In the meanwhile, having bad personal credit can make other aspects of owning a business more difficult, including applying for a business credit card or a loan. Here are some resources to help you in dealing with these issues:

• 5 Best Credit Cards For Small Businesses & Startups With Bad Credit
• The 5 Best Small Business Loans For Bad Credit
• The 5 Best Business Lines Of Credit For Bad Credit
• How Long Does It Take To Improve My Credit Score?

With time and a solid strategy, you can establish a strong processing history and improve your business’s credit score to the point where you won’t need an expensive high-risk merchant account anymore. Good luck!

In Summary: 5 Best Bad Credit Merchant Accounts

1. PaymentCloud: PaymentCloud specializes in providing payment processing solutions for eCommerce, mail order/telephone order (MOTO), and other generally high-risk businesses. They stand out by taking a hands-on approach during the initial application and underwriting process, and they provide intensive follow-up support and advocacy to existing clients.
2. Durango Merchant Services: Durango Merchant Services offers fair pricing in a segment of the market that’s notorious for charging highly-inflated prices. They specifically market to bad credit merchant accounts. The company also has above-average customer service and an honest, knowledgeable sales team.
3. Soar Payments: Soar Payments is a highly-rated high-risk specialist that can accept bad credit merchants. The company is best known for using automated processes to streamline the application and account approval process, allowing you to get up and running quickly.
4. eMerchantBroker: eMerchant Broker's strongest point is that it can often get you approved for a high-risk account even if you've been turned down by other providers. The trade-off is that it's also known for being more expensive than other high-risk providers.
5. PayKings: PayKings is a relatively new high-risk provider that can accept bad credit merchants. It offers a full range of products and services, including ACH & eCheck processing and multi-currency processing.

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Frank Kehl

Expert Analyst & Reviewer at Merchant Maverick

Frank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.

@fjkehl2

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