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Merchant Account for COLLECTION AGENCY Debt Collection Debt Brokers

Debt collection agencies are called only when a client fails to pay the debt installments on time. These are tricky clients with bad credit and the debt collection agencies specialize in handling such clients. So it takes a sound financial company to handle the finances of debt collection agencies. Merchant accounts for collection agency business is not always going to be a straightforward one.

The ‘High risk’ label and online merchant policies

In most countries, debt collection businesses are labeled as high-risk businesses. If you choose to enter the debt collection business you should choose a suitable high-risk merchant account provider. Whether you choose to operate as an online merchant or have an office remember that not all banks provide high-risk merchant accounts. Most of the conventional credit card processors hesitate to take up merchant accounts for online businesses.

Why do banks deny offering a merchant account for debt collection businesses?

Popular credit card processing companies would be ready to handle only small chargebacks. So they often do not deal with all those businesses that are considered as high-risk businesses, like debt collection. But some debt collection businesses end up finding a way to get the approval. Without a detailed background check if the merchant account is approved large chargebacks might attract trouble in future. The merchant account would be shut down for use for several months. During this period the debt collection agency would not access its funds.

The historically large chargebacks that most of the debt collection businesses are known to handle make them high-risk bets for merchant account providers. The clients that the debt collection agency are people with bad credit and there are higher chances of rejected checks. Not all debt collection firms have a strong chargeback handling plan in place. As a result, it creates a huge loss for the credit card processing company. Considering several such factors the banks and credit companies often do not allow debt collection firms to open a merchant account with them.

New business-friendly accounts

For some merchant account providers, Rates Vary by Startup vs History of the business. The other problem that might occur is where a credit card processor rejects applications from a startup. They might be ready to handle debt collection agencies with a good credit performance with larger rates for the merchant account. In the case of startups, the absence of historical data to understand whether the business would be a good bet makes it difficult. So besides falling into the high-risk category, debt collection firms that are new have even bigger troubles to handle.

What should you do?

So if you do own a business dealing with debt collections, whether yours is a new business or an established one, pick a high-risk merchant providers. These are merchant account providers who offer merchant account similar to those offered by the popular banks and credit card processing companies. Though the accounts are very similar in their operation there might be plenty of additional features. There are multiple underwriting banks that source funds during large chargeback instances. The rates of operating the account might not vary drastically based on High Risk vs Low-Risk labeling. These accounts would allow debt collection firms to handle card not present transactions as easily as Retail / Card Present / Signature authentication cases. Also, the business would be able to seek the support of the merchant account provider for ACH Processing/Check Processing services. So there would be a single full-fledged merchant account that can deal with all the Visa/Mastercard/Discover/Amex payments and check drafting requirements as well. This allows businesses to open a single merchant account without having to deal with multiple accounts for multiple payment types. The fees involved in opening multiple accounts can also be eliminated in this case. This makes the high-risk merchant account providers convenient options even for the new businesses with a low budget.

Along with the benefits offered in terms of handling the finances, the high-risk merchant account comes with

  • No setup fees for a virtual terminal for payments made through iPhone/Droid Mobile Apps

  • Secure payment gateway for online transactions

  • No application fee

  • Easy and fast approval of the application

  • Flexibility to choose from a variety of domestic and offshore merchant accounts

So should you choose a domestic account or an offshore account?

If the security of your merchant account is the main criterion a domestic account might appear to be the most secure one. But when you work with a reputed high-risk merchant provider even an offshore account is equally secure. This comes with the experience in the industry and the ability to handle debt collection agencies big and small around the world. Domestic accounts are definitely cheaper to obtain as the account is maintained in the native country. But then if you would like to enjoy the tax benefits that are offered in other countries then an offshore account might be a better choice. This can be significant especially in the case of large value transactions. Also, some countries have caps on the size of the transactions allowed in a certain duration and other such conditions. Study about all such terms and conditions governing merchant accounts. This would help you choose the right type of account for your business.

Offshore accounts make global money transfers simple. So the debt collection firm would be able to pass money beyond borders without any delays. Losses that occur due to time delays can also be averted. Offshore accounts, therefore, offer plenty of such perks. However, for the small business owners who are looking for the cheapest type of merchant account that is easy to comprehend, domestic accounts are better. It is all about weighing the good and the bad in both of these accounts. It is about collating the total costs involved in maintaining the account. So businesses that can handle higher charges for the offshore account can take up such accounts in a country that has more flexibility in terms of taxes.

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