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UNDERWRITING MERCHANT ACCOUNTS

The merchant account providers are large financial agencies that carry out assessments to check if the merchant account is eligible for the particular merchant, or for a customer to obtain their products and payments from it. When it comes to the merchant accounts, the actual underwriting process is carried out by the banks, which belong to the credit card association of major companies like Visa or MasterCard.

The underwriting procedure is composed mainly of analyzing the risk factor of the accounts, with the main concern being that the merchants are allowed to use the credit card acceptance schemes. A detailed and planned evaluation is made of the applying merchants business, organization and their history of processing if they have had any. Another important factor that the underwriting process is concerned with is the merchant’s credit history with all the banks that he has worked with. This is essential because it gives an insight into the sort of transactions and dealings that can be expected from the merchant. As is the case with banks giving out personal loans, they simply use the underwriting procedure to access if their clients are going to be able to keep up to meeting the payment requirements of the provider.

Underwriting determines, in a nutshell, the merchant’s responsibility towards his business, and towards the benefactors of his business and also to the business’ supporters or financiers. This is due to the fact that a merchant account is in fact functioning as a credit extending organization. The merchant receiving a credit card payment has to go through the bank to get the payment verified, cleared and finally settled by the processing bank. Then the bank issuing the card has to remit payment into the merchant’s bank account. If the cardholder makes any disputes or claims fraudulent charges, then the transaction will go into a chargeback case. In such situations, the processing bank may not even receive its payments as the issuer’s bank would stop payment immediately.

When merchants start generating a high amount chargeback rate on a regular basis, then the credit card association will go ahead and impose fines upon their credit card company, which had the task of performing the underwriting process for the account. This tells you how important the underwriting process is, and more important is the merchant account clearing the procedure.

The ISO’s or Independent Sales Organizations are the ones that actually send the processing services to the merchants. They have permits given to them from the credit card associations, plus a long term maintained relationship with the processing banks as well. When the agreement for processing transactions is signed by the bank, the processing bank or the acquiring bank has to make a commitment towards acquiring card transactions from the merchant’s bank. Then they process the funds from the account and at the same time; remove the charges for processing that is paid by the merchant.

The underwriting concept of a merchant account is new found, and highly useful. It is a pre-planned agreement stating that once the process is carried out, the underwriter then has to bear risks of selling the securities if anything should go against the contract, and also take charge of the costs of keeping the securities until they can be sold according to policy.

Setup a credit card processing merchant accounts to accept credit cards today!

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