Merchant accounts provide organizations the ability to collect credit card and debit card payments, but they can be difficult to obtain for certain industries that are deemed high-risk. Collections agencies are traditionally seen as a high-risk industry from a merchant bank’s standpoint. Most banks and lending institutions avoid extending merchant accounts to businesses that specialize in Account Receivables. Although collection agency credit card processing is hard to obtain, it does exist.
The Facts of Credit Card Debt
Most people are in considerable debt. They tend to pay for everyday items and large ticket purchases with credit cards, lines of credit, and other types of loans. Recent studies have shown that the average American household is in debt to the tune of nearly $17,000 in credit cards alone. That does not factor in mortgage payments or rent, automobile loans, and other standard monthly utility bills. It is easy to see how consumers can become completely overwhelmed with debt. This in turn leads to a lack of timely monthly payments.
The Reasons Why Debtors Prefer to Pay Their Balances with Credit Cards
In turn, Collections has become one of the fastest growing industries in recent years. Existing companies are expanding. New agencies are forming at a rapid pace. Competition is everywhere. It is important to offer clients and debtors value added service to stand out from the crowd. A debt collection merchant account is the solution. Most debtors would rather pay their past due balances with credit cards than by cash or check. This is based on a combination of facts.
Paying by credit card is more convenient. It can be done simply and easily online, or by phone. Many debtors do not like to use the cash that they have on hand to pay off old debt. They would rather create additional debt instead. The philosophy is that they will be able to pay it off later. The fact is the new credit card debt may very well end up in collections down the road. This is one reason why banks and traditional lenders do not offer collections credit card processing services.
In addition, chargebacks are a common occurrence in the collections industry. It is a well-known fact that debtors will agree to make a payment, and then cancel the transaction after it has been issued. Banks and traditional lenders fear that the agency will not be able to cover the monetary expenses of the chargebacks. If that is the case, the lending institutions are responsible for the financial liability. The debt collection industry has a negative reputation, within payment processing circles, due to these factors.
The Issues Collection Agencies Face
Unfortunately, most of the issues are out of the agencies control. Although it may seem like a vicious cycle, the ability to collect credit card payments is necessary for collections agencies to either build or expand their business. It equals more revenue for the company, larger commissions for the agents, and happier clients. However, the debt collection merchant account is only beneficial to the agency if it is affordable and reliable. Collections agencies must work with a partner that fully understands the industry, and does not take advantage of the high-risk situation.
How Payment Savvy Can Help
Payment Savvy specializes in providing collections agencies with the ability to accept credit card payments from debtors. Please contact Payment Savvy today to review your options, apply for a merchant’s collection agency account, and to obtain answers to your questions. We look forward to hearing from you and working with your business.
If you have enjoyed reading this article and found it informative, please share it with your contacts on social media. Payment Savvy greatly appreciates your efforts in this manner. Please stay tuned for more interesting articles.