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Do High-Risk Merchant Accounts With Instant Approval Exist?

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Instant approval

It all started with the telegraph. Invented in 1837, this technological advance enabled nearly-instantaneous communication across vast distances for the first time ever. Its introduction into commercial use disrupted a courier system that had been the only available method of communicating from one distant place to another for thousands of years. In 1861, the completion of a telegraph line connecting the west and east coasts of the United States rendered the fledgling Pony Express obsolete practically overnight.

Today, of course, we take instantaneous communication for granted. Thanks to computers and the internet (and the fiber optic cables that actually connect them), we can send huge amounts of data anywhere in the world in practically no time at all. Given all this wonderful technology, if you’re a high-risk merchant, you might be wondering why it takes so long to get approved for a merchant account. You might also be sorely tempted by claims of “instant approval” from merchant account providers who advertise directly to the high-risk community, especially if you’re running an eCommerce business and you absolutely need to be able to accept credit cards. In this post, we’ll explain what “instant approval” really means and why it’s usually not a good idea, no matter how desperate you are to get a merchant account. We’ll also delve into how the high-risk merchant account approval process works and what you can do to make it run a little smoother – and faster. Finally, we’ll recommend a few reputable high-risk specialists that can get you set up with a stable and fairly priced merchant account.

What Is “Instant Approval”?

We get it. It’s no fun trying to run your business with an “In God we trust; all others pay cash” sign posted next to your cash register because you can’t get a merchant account. It also means disappointed customers and lost sales. Under these circumstances, the temptation to sign up with the first provider who will actually accept your business can be pretty overwhelming. Unfortunately, it’s also a really bad idea.

The simple reality is that it always takes longer to obtain final approval for a high-risk merchant account than it does for a low-risk business. While traditional low-risk businesses can expect to be approved within a day or two, high-risk merchant accounts require a minimum of three to five business days to be approved, and this process can sometimes take as long as three to five weeks. Why so long? Approving a high-risk business requires a far more extensive investigation into the credit history of both the business and the business owner. Poor personal credit on the part of the owner is one of several reasons why a business might be classified as high-risk in the first place. You’ll have to submit far more documentation and wait far longer for this process to be completed than a low-risk business would.

So, how can some providers even claim to offer “instant approval”? Well, for one thing, it’s not really instantaneous at all. If you see a provider advertising “instant approval,” there’s usually some fine print included with the offer specifying that approval actually takes 24-48 hours. While that’s a lot faster than the normal time-frame, it’s still not exactly “instant.” What these providers aren’t telling you is that approval for your merchant account is actually a two-step process. First, you must be approved by your merchant account provider. Second, you must be approved by the acquiring bank or backend processor that is actually going to underwrite your account and process your transactions.

Getting approved by your merchant account provider is actually pretty easy, but not for good reasons. The truth is that your merchant account provider’s business model is based on signing up as many merchants as possible in order to generate a profit. They’re also quite eager to have you sign a long-term contract, guaranteeing that you’ll be on the hook for three years or even longer. And if you close your account or go out of business, they’ll usually collect a hefty early termination fee (ETF). Because these early termination fees can run into the hundreds of dollars, it’s possible in some circumstances that your provider will make more money from the ETF than they will from your processing fees. High-risk businesses tend to fail at a higher rate than low-risk enterprises, and most of these providers will not hesitate to charge you the full ETF even if you’re going out of business. Although more and more providers are now offering month-to-month billing with no early termination fees to low-risk businesses, it’s still very unusual not to be required to sign a long-term contract – with an ETF – if you’re a high-risk business. Even the most reputable high-risk specialists almost always impose these terms, so be prepared for it and be sure to review your contract documents very carefully before you sign up for an account, even with a reputable provider.

The second step of the approval process, getting your acquiring bank or processor to approve you, is where the delays and difficulties come into play. The risk departments at these institutions really don’t like to approve high-risk merchant accounts due to the increased chance that you’ll run into problems later on. Every processor has their own criteria for determining whether you’re high-risk, and their own documentation requirements you’ll need to meet before they’ll even consider approving you for an account. While your merchant account provider is highly motivated to approve your account, your processor has every reason in the world not to approve it. Getting approved for a high-risk merchant account is an uphill battle, and the chance of being turned down is very high. Fortunately, there are some really good providers out there who specialize in getting high-risk accounts approved, and they’ll work with you to get your paperwork in order and find a bank that can approve you for an account.

Unfortunately, providers offering “instant approval” sometimes take some shortcuts with this process so they can get you on the hook for that long-term contract (and usually that ETF as well). What they advertise as “instant approval” (or being “pre-approved”) in most cases really means that they’re approving your account – and getting you to sign your contract – before your acquiring bank or backend processor has completed all the necessary steps to determine whether to approve your account. In some cases, your merchant account provider won’t even complete a credit check before approving your account.

This practice is all fine and dandy as long as your processor eventually approves your account. However, there’s a high chance that they won’t approve you, and by the time they make that determination you may very well be up and running with your credit card terminal or payment gateway. If this happens, you may suddenly find your account frozen and your funds being withheld. Even worse, you may have your merchant account closed altogether. (Note that in this case, you usually won’t be liable for an early termination fee since you aren’t the party deciding to close the account). In some cases, depending on the reason for your processor closing your account, you may even find yourself being placed on the Terminated Merchant File (TMF, also known as the MATCH List). Getting put on this list is really bad news, as it can completely prevent you from getting approved for a merchant account, even with another provider, for up to five years.

If you haven’t guessed by now, we highly recommend that you avoid any merchant account provider claiming to offer “instant approval” of your high-risk merchant account. This approval process is incomplete and can easily lead to your account getting shut down shortly after you start using it. No matter how inconvenient it is to wait for the approval process to run its course, in the long run, it’s a worthwhile trade-off to get a fully-approved account that will be stable and reliable.

How To Expedite Approval Of Your High-Risk Merchant Account

Get your merchant funds fast. Image description: Clock with money underneath it

While the approval process is unavoidably a lengthy one, there are steps you can take as a merchant to move things along a little quicker. These actions mainly serve to avoid the kinds of problems that might lead to delays in getting your account approved. Here’s what you’ll want to do:

  • Work With A Reputable High-Risk Specialist: The signup process can be sped up by ensuring there is a good chance of approval beforehand. This means working with a partner that has a proven track record and experience in your industry. High-risk specialists such as Durango Merchant Services will work with you to ensure that your paperwork is in order and can also work with a network of acquiring banks and processors to find one that will approve your business.
  • Have Your Paperwork In Order: You’ll need to provide far more information when applying for a merchant account as a high-risk business owner. If you can present all of this information with your initial application, it will save a significant amount of time during the approval process. We recommend that you scan all required documents as PDF files so you can simply email everything you need to your provider as part of your application. See below for a discussion of specific documentation requirements.
  • Be Completely Honest About Your Business: Are you selling medical marijuana (in a jurisdiction where it’s legal)? Do you have a personal bankruptcy on your record? Have you previously had a merchant account shut down by your provider? High-risk merchants who are desperate to get approved for a merchant account are often tempted to misrepresent these and other facts that might lead to them being disapproved for an account. Don’t do it! Intentionally failing to disclose important information or getting caught in a lie will almost always lead to you being turned down for an account — or having your account closed immediately once the processor discovers your dishonesty. You’re much better off being completely honest about your background. In many cases, you can still be approved for an account despite a little negative information.

As we’ve mentioned above, there’s a lot of paperwork involved with getting approved for a high-risk merchant account. While specific requirements vary from one provider to the next, here’s a generic list of the most commonly requested information:

  • Completed Merchant Account Application (from your merchant account provider)
  • Résumé or CV of business owner
  • Photo ID or Passport
  • Business Plan
  • Personal Utility Bill (used to verify your address)
  • Processing statements for at least the last three months (if you’re switching providers)
  • Copies of supplier’s agreements (for retail merchants)
  • Copies of your personal banking statements (usually for the last three months)
  • Personal reference letter from your bank
  • Copies of your business bank account statements (usually for the last three months)
  • Articles of Incorporation (or sole proprietorship documentation)
  • Articles of Association (if applicable)
  • Screenshot of your business website’s home page (if applicable)

Final Thoughts

If you’re a high-risk merchant, we understand that merchant accounts are not easy for you. Okay, they’re not easy for anyone, but high-risk factors make them even more complicated (and expensive) than they are for everyone else. Unfortunately, it’s too easy to get turned down a few times and start feeling like you have to sign up with any provider who will take you. Also, the inevitable delays in getting your account approved can make the possibility of “instant approval” seem very tempting. Resist that temptation. Instant approval isn’t what its promoters claim it is, and it’s a good way to set yourself up for much more serious problems down the road.

The difficulties that high-risk merchants encounter in getting a merchant account have, unfortunately, created a market opportunity for unscrupulous providers who use the lure of “instant approval” (or, sometimes, “guaranteed approval”) to lock you into a prohibitively expensive long-term contract with high fees, high processing rates, and an onerous early termination fee to discourage you from canceling your account on your own. Do a Google search for “high risk merchant” account, and you’ll quickly find ads from plenty of predatory merchant account providers looking to take advantage of your desperation.

Fortunately, it doesn’t have to be this way. There are reputable providers who specialize in working with the high-risk community and will go out of their way to get you fully approved for an account. While their prices and contract terms won’t be as great as what a low-risk business could obtain, they’re still reasonable and backed up by top-notch customer support. We’d also note that none of the high-risk specialists we’ve found offer “instant approval.” Instead, they’ll work with you and help you to get your documentation squared away so you can be approved by one of their partner processors for a stable account that won’t get shut down the moment you actually try to use it.

Of all the high-risk specialists we’ve reviewed, we’ve found Durango Merchant Services and Easy Pay Direct to be among the best of the best. They both have strong track records of providing high-quality service at reasonable prices. For more recommendations, check out our post The Best High-Risk Merchant Account Providers or see the chart below.

DurangoSoar PaymentsSMB GlobalHost Merchant Services

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Frank Kehl

Frank Kehl

Frank Kehl has been writing about 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. After a long and enjoyable career of traveling around the world as an Air Force navigator, he’s comfortably settled down in the wine country town of Paso Robles in California’s scenic Central Coast region. He enjoys reading, photography, hiking, and numerous other outdoor pursuits.
Frank Kehl
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