The Best Bad Credit Merchant Account Providers

If your credit isn’t exactly perfect, you might have a challenging time finding merchant account providers that will work with you.

But that doesn’t mean that you don’t have options. You do.

There are many companies that specialize in working with merchants (aka business owners) that have bad credit, and the best part is that when you build your credit card processing history, you may eventually be able to secure better rates.

Let’s talk about everything you need to know when you’re searching for a payment processing company that works with merchants with bad credit. But first, we want to share our picks for the best companies that partner with businesses like yours.

Our Top Picks for Bad Credit Merchant Account Services

Easy Pay Direct
Ecommerce, high-risk, and retail merchants.
Good for high-risk industries
Very few negative reviews
Single Point of Contact for Multiple Merchant Accounts

summary

5/5

Best for

E-commerce companies, SaaS companies, "high-risk businesses", & established small/medium businesses ($500,000+ in annual sales)

Specializes in

Easy Pay Direct has unique gateway software and banking solutions to optimize payments for eCommerce, SaaS, information products, supplements, and CBD amongst other verticals.

Pricing Summary

Setup Fee:  $99

Monthly Fee: $24.95

Swipe Rate: 1.59% + $0.17

Keyed-in Rate:  2.39% + $0.29

Early Termination Fee: $0 (domestic accounts)

Contract Terms:

1 Year 3 Years
eMerchantBroker
Adult, high-risk, and retail merchants.
Works with any size high risk business.
No setup fee.
Variable rates depending on the merchant's volume.
Merchants are notified whenever a fraud or chargeback occurs.
Checks are allowed to be accepted from customers.

summary

4/5

Best for

eMerchantBroker is best for any size business that is considered high-risk. It's considered one of the top payment processors for high-risk businesses that would otherwise have difficulty finding a standard merchant account provider. 

Specializes in

eMerchantBroker specializes in credit repair, collections agencies, adult websites, travel and timeshare, firearms and guns, bankruptcy and bad credit, online and in-person smoke shops. They also work with electronic cigarettes and other companies that fit into the high-risk merchant account category.

Pricing Summary

Setup Fee: $0

Monthly Fee: Undisclosed

Swipe Rate: 3.00% + $0.15

Keyed-in Rate: 4.00% + $0.25

Early Termination Fee: Up to $595

Contract Terms:

1 Year 3 Years
Dharma Merchant Services
Non-profit, restaurant, and retail merchants.
No early termination fee.
Month to month contract.
No annual fee.
Interchange plus pricing offered.
Discounted pricing for qualified non profit companies.

summary

4.5/5

Best for

Dharma's website caters its services to small-sized businesses with up to twenty employees, in verticals such as restaurants, non-profits, and e-commerce platforms.

Specializes in

Dharma Merchant Services provides mobile phone processing and tablet-based POS options for merchants courtesy of Clover. Moreover, Dharma offers the Clover Mini station, which includes Clover's PRO software set. The company also resells the Clover POS solution, including a full cash drawer, built-in fingerprint scanner, and printer.

Pricing Summary

Setup Fee: N/A

Monthly Fee: $20

Swipe Rate: N/A

Keyed-in Rate: N/A

Early Termination Fee: None

Contract Terms:

Month-to-month

What is a Bad Credit Merchant Services Provider?

A merchant services provider is a company that specializes in making it possible for businesses to process credit cards and other types of payments.

A bad credit merchant services provider is the same type of business that has experience with and is set up to work with merchants that have bad credit.

A lot of business owners assume that they will never be able to find a merchant account provider when their credit isn’t up to par, but that’s not the case at all.

Companies are out there that often work with people who have less-than-stellar credit.

What Services do Merchant Account Providers Offer?

Merchant account providers offer many services to businesses, but their main focus is on providing them with a way to process payments for their goods and services.

A merchant account is more like a holding tank for the money you bring in for sales. When a sale is approved, the money is drawn from the customer’s account and sent to your merchant account.

From there, any necessary fees are removed before it is then transferred to your business bank account.

Some companies also offer actual payment processing services. This is convenient for many business owners because they end up getting both of these services from the same place.

Additional Services

It’s worth mentioning that many MSPs also offer additional services too, such as:

  • Loyalty and gift card programs
  • ATM placement and maintenance
  • Business funding (working capital)
  • Payroll and other bookkeeping services
  • Inventory tracking and management

What Types of Merchants Need Bad Credit Payment Processing Services?

There are many issues that could result in a merchant needing a credit card processing company that works with businesses with bad credit.

Also, please keep in mind that as the business owner, your credit will be under scrutiny as well. So if your credit score is low, many MSPs will consider you a credit risk.

History of Bankruptcy

Have you or your business ever filed for bankruptcy? If the answer is yes, you will most likely be placed in the bad credit category.

The good news is that a bankruptcy won’t follow you around forever; it only stays on your credit report for seven years (Chapter 13) or ten years (Chapter 7).

Once the appropriate time limit has expired, the bankruptcy will drop off your credit report entirely.

Low Personal Credit Scores

It’s a good idea to know what your FICO credit score is. If it is 580 or less, you may be deemed a credit risk and placed in the bad credit category.

You might be better off if your business is established, with a current payment processing history.

But if your business is new and your FICO score is low, this could be a problem.

Outstanding Personal Judgments or Liens

If you have a judgment against you by a criminal or civil court, that could have a serious impact on your credit. The same is true if you have a lien, although there is some leniency there as long as you are making your payments on time.

But if you have a lien because you didn’t pay taxes on time, that’s different than if you have one because you put your house up for collateral to get a loan that receives regular payments.

Should Bad Credit Merchants Use Payment Aggregators Instead of MSPs?

A lot of merchants with bad credit make the decision to skip working with a payment processing company in favor of working with a payment aggregator instead.

A payment aggregator is a company like Stripe, PayPay, and Square.

These companies offer payment processing services to businesses, and on the outside, their services appear to be everything a merchant could need.

But in reality, working with these companies could cause problems for your business.

Payment aggregators hold one master merchant account that they use for everyone. Because multiple businesses use it, when one business has too many chargebacks, it can put the account at risk.

It’s not uncommon for companies like Stripe and PayPal to place holds on their merchants’ accounts for excessive chargebacks, as well as for other reasons.

If your funds are frozen, it can take a long time to be able to access them again. Some merchants even find that payment aggregators will close their accounts completely, without warning, and without explanation.

It’s much safer to work with an MSP that will provide you with your own dedicated merchant account and payment processing services.

What to Consider Before Choosing a Bad Credit Merchant Account Provider

Once you determine that you need to work with a merchant account provider that specializes in working with people with bad credit, there are a few things you’ll want to keep in mind.

You Will be Considered High-Risk

There really is no getting around being labeled high-risk, at least for now.

But the good news is that time is on your side. While you might need to settle for higher rates and fees for the time being, this could easily change once you get a little processing history under your belt.

Eventually, you should be able to negotiate contract terms with any company you choose. Or, once you reach a point of being standard-risk, you might want to shop around again to find a merchant account provider that can offer you better rates.

Be Careful About Signing Contracts

There is also probably no way to get around signing a long-term contract with any company you choose to work with because of your high-risk status.

But that doesn’t mean you shouldn’t pause before you sign a contract with them.

First, make sure you know what you’re signing. All fees should be spelled out clearly in a way that you can understand them. If something doesn’t make sense, ask about it.

Second, if at all possible, you’ll want to avoid getting into a long-term contract for any payment processing equipment, such as a POS system or credit card terminals.

Those contracts can be lengthy and expensive. You could end up paying thousands of dollars for equipment that would have only cost you a few hundred if you had purchased it outright.

Also, equipment contracts are often different than contracts for payment processing services. They may even be separate contracts with completely different companies.

Don’t be afraid to ask as many questions as you need to before you sign any contract.

Rolling Reserves

As a high-risk merchant, you will probably be subject to rolling reserves, which can catch any business owner off-guard if they don’t know what that means.

A rolling reserve is an amount that is pulled from your sales each month and kept in a separate account.

That money acts as a cushion, and it is used to protect your business and the MSP if there are an excessive amount of chargebacks.

It’s called “rolling” because, at the six-month point, the amount that was pulled during the first month will be sent to your business bank account. This process continues, and eventually, you may not need to have reserves at all.

How to Get a Merchant Account if You Have Bad Credit

There might be a few extra hoops you’ll have to jump through in order to get a merchant account as a business owner with poor credit. But that doesn’t mean you can’t get one.

The process is basically the same as it is for standard-risk merchants; except that you might have to wait a little longer before your account gets approved.

You’ll also find that there are a limited number of companies out there that are willing to assume that risk, but they are out there. Here are some tips to help you get started:

  1. Research as many MSPs as you can that specifically work with bad credit merchants. Make sure they offer what you’re looking for.
  2. Get quotes from the ones you like the best so you can compare them side by side.
  3. Negotiate to get the best possible deal you can. You might even try getting a deal on your processing rates, or asking them to waive your early termination fee.
  4. Submit your application and all required documentation. They should give you a complete list of what they need.
  5. Wait until they get back to you with an answer about your approval. Keep in mind that once they’ve received everything they’ve asked you for, you may still need to wait about a week to get approved.
  6. Once you’re approved, read over your contract carefully and ask questions about anything that seems out of the ordinary, or that you don’t understand.

What to Expect with Bad Credit Credit Card Processing

Here’s the unfortunate reality - if you’ve been categorized as high-risk, it’s going to cost more for you to process payments.

There’s more you should expect to experience as well.

Higher Fees

You’ll probably need to pay higher fees to open your merchant account and secure payment processing services; at least in the beginning.

Many merchant service providers charge monthly fees and/or annual fees for their services. You may also be required to pay application and/or approval fees too.

Hidden fees are typically hard to find, so make sure to ask about them before you sign a contract.

Higher Processing Rates

High-risk merchants should expect to pay transaction fees that are just about double what they would be for a standard-risk merchant.

You may be offered tiered pricing, although there are some providers that offer interchange-plus, which is definitely more transparent, and often, more affordable.

Limits on Monthly Processing Volume

Many high-risk merchant accounts come complete with a cap that tells you how much you’re allowed to process in a month.

If you go over that amount, the company may freeze your funds until you reach the end of your billing cycle.

This can be avoided by being 100% transparent about how much you expect in processing volume each month. That’s something each company will ask you, so be honest about how much business you expect.

Fortunately, honesty is always a good policy in the credit card processing world. When you work with your MSP, and you don’t try to hide anything from them, you’ll probably find them to be pretty amenable to meeting your needs.

Programs That May Help

The best high-risk merchant account providers understand the difficulty of the situation you’re facing. That is why so many of them offer additional services that may be able to help you, such as:

  • Chargeback protection - to assist you in the event of a lot of chargebacks on your account.
  • Chargeback prevention - to identify potential chargebacks and possibly even mitigate them before they get through.
  • Fraud protection - to identify any possible cases of fraud, which could lead to excessive chargebacks.

Our Final Thoughts on Top Bad Credit Merchant Accounts

Fortunately, having a poor or even a bad credit score today doesn’t mean you’re destined to have one forever. That is something you can always work toward changing.

In a year, you might find that you’re ready to move on to a standard-risk processor that will be much more affordable.

For now, choose your bad credit merchant account provider carefully. Make sure they come highly recommended. And don’t forget to check out the ones we’ve listed here.

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