Why Do Credit Card Processors Need to Run My Credit?

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Have you ever wondered how you receive your money back when filing a credit card dispute with your card company? The money doesn’t appear back in your account out of thin air, and the card company hasn’t forced the merchant to return it. It is the card company’s funds that appear back in your account. When the credit card processor approved the merchant for card processing, they agreed to be responsible for a certain amount of risk. One of those risks is that the merchant might have customers that file many disputes. Another risk could be that the merchant can’t afford to pay their bill at the end of the month, due to poor financial choices. Similar to receiving a loan, credit card processors lend a service to business owners and trust that they will be able to pay their processing bill at the end of the month. 

Any party giving funds on credit needs to know how likely it is that they will be repaid. It’s why loan companies who give money to individuals with poor credit tend to increase interest rates. They know it’s somewhat unlikely they’ll receive every monthly payment, so they make more money on fees. Credit card processors essentially loan the ability to merchants to accept credit cards by initially paying the fees for every transaction. Also, processors give merchants their earnings daily, without charging for the fees attached. That is, until your monthly payment.

What if I Can’t Pay My Credit Card Processing Bill

Unlike payday loan agencies, credit card processors are unlikely to approve merchants who have a history of not paying on-time. There is a risk that by the end of a merchant’s payment cycle, they may be out of business and unable to pay credit card processing fees. Then, the payment processor would not only be stuck with the transaction fees of the credit card companies, but also any card dispute fees that they covered for you during the month. The merchant service provider has to pay it back to the card company at their own loss.

My Personal Credit Doesn’t Relate to My Business Credit

You may be right. Many merchants have very different payment tendencies between their personal and professional debts. Unfortunately for those business owners, the majority of people handle business and pleasure funds identically. For first-time payment processing applicants, they don’t have a safe history of business ownership. Viewing personal payment history is the only way to gauge financial responsibility in those cases.

Late payment history is not the only factor credit card companies check for. An applicant having a bankruptcy can be a red flag too. People tend to pay their mortgage before their business expenses. If you historically don’t pay either, card processors will be concerned about loaning you the monthly service.

“Don’t Mix Business With Pleasure”

It’s advice every new business owner has been told – probably more than once. It seems contradictory then to have to show personal payment history for a professional service. However, card companies need some way to determine if you are financially responsible and should receive their loaned support. We at PayFrog understand the frustration and concern, and that’s why we welcome you to start a conversation before you apply. We’re happy to explain everything else you should expect when applying for a merchant account.


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