We recently tried to open up a merchant account for our start-up and we're facing some problems. We've processed payments through Paypal for the last year or so and have had little issue w/chargebacks, refunds. However, when we applied for a merchant account we were initially denied by a few banks. We have a bank that will loan but is requiring us to put a CD up equal to one month of revenues. And our interim CFO thinks it is likely they will ask for as much as three months of revenues as we grow. So the rub is if we grow at any decent clip we basically put ourselves out of business funding a CD that protects the bank against chargebacks. Not good... Is anyone else facing this. I've opened up merchant accounts in the problem and never encountered this before. I guess it's a reflection of the credit crunch. Gotta love the sub-prime boys for this one...
It looks the type of business that you are doing is a kind that gets high chargeback. For such kind of business it is usually hard to get a merchant account and the alternative is a third party processor. In some instants the third party processors may also not be willing to accept certain high risk businesses. In this regard the concession that you able to reach with your merchant account provider bank could be something you strive to keep it rolling. Is the bank using the CD as a form of guarantee and if in case the merchant fails to pay the bank is to take the money from the CD? May I ask also the name of the bank that provides the CD as form of guarantee?
The thing is we're really not. And being told that this is actually pretty common now with new accounts because of the stuff that is going on in the credit markets. What they are using the CD (I think) is insurance against chargebacks, refunds, etc. But we aren't even selling a physical product so our instance of people asking for money back after about a 24 hour period is essentially zilch. This is all crazy to me...
Well, you should try a few other Payment Services Providers (search on google), most Acquiring banks will ask for a Holdback/Reserve of 10% some even only 5% and that's for protecting them against chargebacks or any other excessive chargeback penalties. On the other hand, I assume you are in the US, it might be cheaper to find a good payment processor there, what you might be interested is to look into cdgcommerce.com , they have only good reviews all around the Internet and their rates and fees and conditions looks to be good. If you are a European citizens I would try to contact WireCard, they are good and a huge company with good support and reliable payouts.
If you are tired about charge-backs, credit card frauds from your customer, try the following list, they are digital currencies where you never will get a chargebacks. When you receive, your customers can't ask for a refund: HooPay: Located in tax haven country. No Charge-Backs. They have 19 currencies supported, multicurrency accounts, deposit with bank wire, credit card, exchanger, API digital signature to prevent spoofing attacks, sms alerts each time that you make transactions, login, etc. Send fax, sms... Liberty Reserve: No Charge-Backs. Only usd and eur, exchanger deposit and withdrawal, located in tax haven too. Cheers