What you need to know before setting up an offshore merchant account

When you are considering a high-risk merchant account, it helps to combine it with an offshore bank account to receive settlements in a confidential tax-free setting. Offshore merchant accounts give you the benefit of higher sales volumes because you are allowing your customers the ability to pay by credit card.

As a general rule, when setting up a high-risk merchant account through offshore banking services, there are a few facts you should be aware of:

1. Anonymous merchant accounts are not permitted. It does not matter if you are using an anonymous Bearer Share Corporation. When setting up an account, the merchant account provider may or may not ask you to provide relevant company documents such as financial statements or some form of identity information.
2. You will need to find out what the duration of time will be between the sale and receiving the funds, as well as how often you will be paid. For example, some offshore banks pay out once a week, while others may have a payment delay of as much as three weeks. The merchant account provider may also require you to have at least $75,000 each month in accumulated billing for the previous six months. This means that you should not fill out an application for an account unless you can prove to them that you can make them a profit with billings you expect to collect in the area of $75,000. This makes it difficult for some companies to actually obtain a merchant account; therefore, many are turned away.

3. If your company experiences a high chargeback rate (beyond the typical 1% to 2% range), your account could be closed. However, some merchant account providers will work with you to reduce your chargeback rate before moving to the final step of closing your account, particularly if your chargeback rate is less or equal to 3%. This is more of a general rule rather than a requirement of any merchant account provider. But at the same time, a high-risk merchant account provider that looks to help you reduce your chargebacks may be worth looking into.

1. Some countries have a high rate of chargebacks, which is really a fraud problem, so some merchant providers will block those countries from even applying.
2. There are also fraudulent offshore merchant providers, which you need to be aware of. Fraudulent processors will let you process several months' worth of sales that are kept in a chargeback hold-back fund. They make excuses for not releasing these amounts and keep delaying for 2 to 3 more months and then close your account. For example, let's say you were billing $30,000 per month, and they have a $10,000 rolling 10% hold-back fund. But remember, they have not paid you for three months; therefore, they are sitting on $100,000 worth of your money. You will never see that money after they have closed your account, regardless of what is stated in their contract advising of a return of your money after a period of 6 months.

These were a few things you should remember before setting up a merchant account for your high-risk business through offshore banks. Keep these in mind to ensure your business runs smoothly, without any roadblocks.

Liberty Enterprises offers a wide array of offshore and US domestic credit card and Ach/E-check merchant solutions.For more visit www.confidentialbanking.com