It’s difficult to get a merchant account approved. Try getting one approved for a credit repair business.
Credit repair account declines are a common occurrence. Major banks have deemed the credit repair industry as high-risk. Payment processors tend to treat credit repair clients as ticking time bombs.
The good news is…
Credit repair businesses can build resilience against account declines and maintain a consistent stream of payments. Here’s how…
Guide Contents:
- Why Credit Repair Merchant Accounts Get Declined
- How Account Declines Can Damage a Credit Repair Business
- Steps to Building a Decline-Proof Payment Plan
- Keeping Your Business Safe in the Long-Term
Why Credit Repair Merchant Accounts Get Declined
Understanding the Reasons Credit Repair Merchant Accounts Get Declined is the first step toward building a resilient payment strategy. Without this knowledge, businesses are doomed to repeat the same mistakes over and over.
Credit repair is solidly in the high-risk industry category. Major banks, such as Chase, Citi, and Wells Fargo, are very unlikely to work with credit repair businesses. This hands-off approach also applies to payment aggregators like PayPal and Stripe.
The primary reason for this?
Chargeback ratios. Credit repair clients are prone to payment issues. In fact, this is literally why clients hire credit repair services in the first place. It follows that the industry will have higher than normal rates of chargebacks.
Credit repair client demographics. The individuals and businesses who require credit repair have already shown a history of difficulty with payments. Banks don’t like the look of this at all. It screams “high-risk client” at them.
Billing and subscriptions for recurring payments. Most credit repair services will bill clients via monthly subscriptions. Clients frequently forget about these charges or change their minds mid-month. Both scenarios result in chargebacks.
Regulatory pressure and compliance. Credit repair businesses are highly regulated. One slip-up can lead to account termination.
The Real Cost of Credit Repair Account Declines
Credit repair account declines are an attack on the ego. That’s how some in the industry view them. But there’s no denying the material cost of having an account terminated.
35% of cardholders permanently abandon merchants after a single card decline. In other words, over a third of a business’ potential revenue.
Worse…
Merchant account termination creates its own problems. The consequences of the termination last for a long time, too.
- Loss of revenue during transition to a new processor
- Higher fees with new payment processors
- Rolling reserves that tie up money in a locked account
- Placement on the MATCH list
The MATCH list is particularly vicious. If a business gets placed on MATCH, it’s going to have an extremely difficult time getting approved for a new merchant account for five years.
Credit repair businesses are still growing. The market was valued at $4.84 billion in 2024 and is expected to keep climbing for the foreseeable future.
Folks, there’s a ton of money to be made in the credit repair industry. This money is up for grabs. But only for those businesses that can actually take and process payments.
Steps to Building a Decline-Proof Credit Repair Payment Plan
Successful credit repair businesses don’t put their heads in the sand and hope for the best. They create systems that prevent declines before they even happen.
Work With High-Risk Specialists
Stop wasting time and money on applications to major processors. They’re just going to decline them anyway.
High-risk merchant account providers specialize in the credit repair industry. They know the clients and how their businesses operate. They expect the chargebacks to happen. They have systems in place to deal with them.
Look for high-risk providers that can offer:
- Experience with credit repair clients and their payment patterns
- Chargeback alert systems
- Multiple banking partners
- Reasonable rolling reserve requirements
Implement Chargeback Prevention Measures
Chargebacks are the death of merchant accounts. All credit repair businesses must have a strong chargeback prevention program in place.
Chargeback prevention starts with clear communication. Clients should have a complete understanding of what they are paying for and when they will be charged. Any confusion is a likely source of chargebacks.
Billing descriptors should also be easily recognizable. When a charge appears on a client’s statement, they need to immediately recognize the business that it came from. Billing descriptors that don’t explicitly mention the business name are a red flag.
Set up chargeback alerts. These systems are designed to ping a business whenever a chargeback dispute has been filed. At this point, the business has the opportunity to take action and reverse the chargeback before it becomes a chargeback.
Diversify Payment Processing Accounts
A business with only a single merchant account is just asking for trouble. In the credit repair industry, this is literally a recipe for disaster.
A diversified payment processing strategy includes multiple merchant accounts. These accounts can be spread across two or three different providers. If one account terminates, the business remains open through the other accounts.
Things to consider with this strategy:
- Two or three high-risk merchant accounts
- ACH as a backup method of payment
- Payment facilitators that focus on high-risk clients
Maintain a Clean Set of Documentation
Banks and processors need to know that a credit repair business is operating a legitimate concern. They want to see documentation that proves it.
Businesses should have detailed records of the following:
- Customer agreements
- Confirmation of services rendered
- Refund policy
- Communication logs
The documentation is useful for fighting chargebacks when they are filed. The documentation is also there when it’s time to apply for new accounts, showing that the business is well run.
Protecting Your Credit Repair Business from Declines Long-Term
Building resilience isn’t a one-time process. It requires constant vigilance and improvements where needed.
Monitor Chargeback Ratios
Accounts that exceed a 1% chargeback ratio will be terminated. This is true for most credit processors. High-risk providers have a slightly more lenient tolerance, but nobody is OK with chronic disputes.
Track chargeback ratios every month. When the number starts to trend upward, it’s time to investigate. Determine the source of chargebacks and eliminate the problem.
Stay Within Compliance Regulations
Credit repair businesses must comply with the Credit Repair Organizations Act. Compliance violations can lead to a faster account termination than chargebacks.
Key regulations to keep in mind are:
- No upfront fees before services are rendered
- Written contracts with specific disclosures
- Clear cancellation rights for clients
Build Processing History
The longer a credit repair business has an active and clean history of processing payments, the better it looks to banks. Good processing history can lead to lower rates and more account options.
Businesses can build history by starting small. Process what the account will allow. Then, once a period of time passes without problems, apply for increases in payment volume.
Plan for the Worst-Case Scenario
It’s best to assume that eventually a credit repair business is going to get an account decline. It doesn’t mean the end of the business. But smart business owners will have contingency plans in place.
Keep relationships with multiple high-risk processors. This way, the business has a short list of potential processors to reach out to at the time of an account decline.
The business should also have application materials up-to-date and ready to submit. There should be enough cash in reserve to cover potential rolling reserves with a new provider.
Wrapping Things Up
Credit repair account declines don’t have to be the death of a business. With a proper plan in place, account declines are a pain to handle, but they’re not a fatal blow.
Key takeaways from this guide:
- Understand the primary causes of credit repair merchant account declines
- Work with processors that specialize in high-risk clients
- Have solid chargeback prevention systems
- Diversify processing accounts
- Maintain clean sets of documentation
- Always remain in compliance with applicable regulations
Credit repair is a business with massive potential. There is a ton of money to be made for those that can navigate the payment processing challenges. Building resilience against account declines is how businesses separate themselves from those that fail.
Credit repair businesses can put these strategies in place immediately. There’s no time like the present to get started building safeguards against account declines and processing problems.
