On the surface, it seems like getting an automotive merchant account would be a pretty straightforward process.
Think about it. Dealerships, auto shops, and car washes, for instance, often process fewer overall transactions than a retail business. Also, they don’t have nearly as many contactless payments, which are much more susceptible to fraud and chargebacks, as other types of businesses, yet they aren’t that easy to obtain.
Why Are Automotive Merchants Considered Risky Businesses?
What works against a business in the auto industry is that, in general, its average ticket sizes are often larger, such as buying a new vehicle or paying for a major repair or service. Expensive repairs and purchases have the potential of high-priced chargebacks, which is when credit card companies make merchants repay for disputed or fraudulent charges.
These factors are some of the reasons why businesses in the automotive industry are labeled “high risk” by banks and traditional lenders. If you can’t get a merchant account, you can accept and process credit and debit card transactions safely and efficiently.
Though banks don’t want to take a risk on businesses in the auto industry, third party lenders will. When you are ready to apply for a automotive merchant account, look for a high-risk merchant services provider. These types of providers know the unique challenges of your business and how to handle them while offering payment solutions to work for your business’ needs.
Sometimes Banks Aren’t the Best Route to a Merchant Account
Many times, when a bank denies you an automotive merchant account, it will send you to one if its acquiring banks, which is like working with a third party. If you enter into an agreement with an acquirer, you will pay one set cost for payment processing, software, and hardware, but, in actuality, each service will likely be provided from three different companies. In this situation, the overall costs will be more expensive and likely not integrate as well as you had hoped. Also, it critical that the acquirer you partner with accepts all major credit cards. If not, you will need to apply directly to each credit card business.
Types of Automotive Industry Businesses
An automotive merchant account is available for many types of businesses in the industry, including:
- Car dealerships
- Auto repair shops
- Paint and body shops
- Tire stores
- Towing services
- Car washes
- Auto parts shops and suppliers
Documents Needed to Get an Account
When you apply for an automotive merchant account, you will need to provide some standard paperwork to underwriters and processors for review.
Expect to submit the below documents to processors:
- A valid, government-issued ID, such as a driver’s license or passport
- A bank letter or a pre-printed voided check
- Three months of your most recent bank statements
- Three months of your most recent processing statements, if applicable
- A SSN (Social Security Number) or EIN (Employer Identification Number)
Additionally, a merchant account provider will want you to have a chargeback ratio of below 2% and a secure, functional website.
Other Features to Think About
With so many competitors, auto shops, for example, need to stand out from the crowd. Promotions, rewards programs, and coupons are great ways to build customer loyalty and repeat customers, so it is also helpful if you enter into a contract with a merchant service provider that seamlessly integrates customer engagement applications and tools.
The Last Word
Though getting an automotive merchant account may not be as getting one for other lower risk businesses, it’s not impossible. If you are looking for a well-integrated payment solution, then apply for an automotive merchant account from First American Merchant (FAM). Its online application is simple and straightforward.
Whether your business handles auto repairs, sells used cars, tows vehicles, sells car parts or offers auto transportation services, FAM has your payment processing needs covered.