What is a “Backup merchant account”? A Quick Overview
A merchant account is a specific type of bank account that allows merchants to accept payments. Typically, a merchant account is used for credit card processing and eCheck processing but can be used for a variety of payment processing needs. A “backup merchant account” provides a plan B for merchants who want to ensure the stability of their payment processing. The idea behind a “backup merchant account” is that if you experience an issue with your primary merchant account (such as a hold, freeze, or closing) then you already have another one up and ready to take its place. However, it is not as simple as it sounds. Having a “backup merchant account” does not make sense because it serves no purpose if it is not active except providing a false sense of security. This is why a “backup merchant account” alone is not enough. What you need is an additional merchant account that processes half of your sales volume.
WhY a “backup merchant account” is not enough
Your “backup” must be active
There are multiple reasons why a “backup merchant account” is not enough to protect your payment processing. Perhaps the most important reason is that it serves no purpose if you are not using it. Lot’s of merchants are lulled into a false sense of security once they have a second merchant account. They think that they are covered until they have an issue with their merchant account and decide to shift all of their sales volume to an empty, non-active, “backup merchant account”. This sounds good in discussion but in practice is a terrible idea. When a merchant account provider sees an inactive merchant account become active and go from 0 dollars in sales to $100k in an instant, this appears as fraud to them. When this happens it is VERY likely that the merchant account provider will hold money, freeze the account or shut it down all together. Just like that, the purpose of a “backup merchant account” is defeated. This is why it is crucial to use an additional, active merchant account and distribute your payments across multiple merchant accounts.
You have to find the right merchant account provider
The second reason why a “backup merchant account” is not enough is that if you’re not using the right merchant account provider then it can all be for nothing. If your merchant account provider does not take the time to underwrite you so they understand who you are and your business model then everything you do comes as a surprise to them. Many merchant account providers don’t underwrite and instead take an “approve now, ask questions later” approach. This forces them to be very reactive to anything they perceive as risky so if you have a high risk business, have an increase in chargebacks/disputes or have a spike in volume for a merchant account then their only course of action is to hold money, freeze accounts, or shut them down. As you can see having an additional merchant account with the wrong provider serves no purpose. The right merchant account provider would take everything from underwriting into account before reacting in such a way. The good news is that there are strategies to help ensure that you are working with the right merchant account provider and to keep your additional merchant account active.
Strategies behind additional merchant accounts”
Keeping your additional merchant account active
In the event that a merchant’s account runs into a problem forcing the merchant to pivot to their additional merchant account, that account must be active to avoid raising flags. In order to do this a merchant needs a service like the East Pay Direct gateway which uses a process we call “transaction routing”. The EPD gateway allows multiple merchant accounts to be loaded into it and automatically distributes your sales volume evenly across them. This way, if one goes down then you already have active merchant accounts running and ready to take its place.
finding the right merchant account providers
Working with only one merchant account provider results in one single point of failure for your payment processing. If all of your merchant accounts are with one provider and they change their policy then all of your merchant accounts are affected. This is why it is crucial to get merchant accounts from different merchant account providers that also underwrite. At Easy Pay Direct we do this for our clients by leveraging our relationships with merchant account providers and supplying clients with multiple underwritten merchant accounts from different providers.
Do you need an additional merchant account?
If you are in a high risk industry or are processing over $250k in volume a year, an additional merchant account is necessary for you as the stakes are much greater. The more time spent without one is more time your payment processing is at risk. However, an additional merchant account is good practice for any business as the risk of having one point of failure for your payment processing is still prevalent.
How to get an additional merchant account
The first step on your path to an additional merchant account is starting the Easy Pay Direct application or if you would rather chat with someone to find out more, call us at (800) 805-4949*. We can get you set up in as little as 2 DAYS!
*Hint: This is easier cause we can fill out your application for you!
Why Easy Pay Direct?
We pride ourselves on making your life easier and facilitating the growth of businesses across the globe. We have been doing this successfully for years and have helped countless high risk businesses achieve their full potential, just check out some of our testimonials. More importantly, Easy Pay Direct would love to play it’s part in helping you achieve your goals and service your costumers smoothly. We assign you your very own Certified Payment Specialist and provide you with one point of contact for all of your merchant account needs. If you’re interested in working with us, you can start your application below or call us at: (800) 805-4949