Subscription and Annual Membership Merchant Account

The internet has opened up a wealth of business opportunities for entrepreneurs in recent decades, including membership websites. Whether a merchant is offering products or information, the exclusive nature of a membership site promises customers a uniquely rewarding experience. However, like many online enterprises that carve out new business niches (or that fill existing niches in new ways), the membership site industry has experienced some bumps as it finds its feet. As a result, it can be a bit challenging for merchants starting up a membership site to do the very thing that makes the venture profitable: collect membership fees from customers via a credit card processing account.

Most traditional financial institutions are, by their very nature, cautious – both of financial risk and of danger to their reputations. If they have concerns that certain business practices common in a certain industry might prove “brand damaging,” they’re far more likely to cut loose any merchant in that field than examine in depth whether an individual client is engaged in shady business practices. In 2010, the proprietors of many membership websites found their merchant accounts abruptly closed. The reason for this was that MasterCard had released new guidelines that put certain practices common to the membership site business model under much greater scrutiny. Now, membership sites are regarded as “high risk” merchants whether they engage in these activities or not. This makes it hard for a business owner to find an institution willing to accept his application for a membership site merchant account in the first place, and even harder to find one that will offer him reasonable terms on his account.

Why are Membership Sites Deemed “High Risk”?

Before MasterCard’s tighter rules were implemented (Visa has also issued similar guidelines), many membership sites used techniques that were widely regarded as deceptive, or even fraudulent.

  • “Negative option” enrollment – in other words, the customer makes a single payment for a product or service, but in doing so they are automatically signed up for a paid monthly subscription which they must actively cancel or opt out of to avoid being charged.
  • “Free trials” that aren’t free – the customer or member is promised something for “free” (including “deferred billing” or “just pay shipping!”), but the process of obtaining the “free” item or service results in them unknowingly being signed up for a paid membership or subscription.
  • Burying terms in the fine print – the membership site makes the terms of its charges and refund policy difficult to find by hiding them in the middle of a lengthy user agreement, or in tiny text in some obscure corner of the website.

How Does this Affect Your Business?

Your membership site may be entirely forthright and honest with its members about any charges to their cards, but being part of an industry with a reputation for deception makes it harder to obtain a membership site payment processing account – especially one with decent rates and conditions. Your best option is to work with a credit card processing company that specializes in high risk merchant accounts. Some of the payment processors willing to offer you an account may charge high fees or hold back an unnecessarily large percentage of your income as a “rolling reserve” to cover the risk of chargebacks and other losses from unhappy members. While processing companies are taking a gamble by offering accounts for membership sites and need to protect themselves, these high rates can be painful for small businesses. Durango Merchant Services is proud to work with high-risk merchants and listen to their needs in order to provide affordable membership site accounts.

Durango Merchant Services is here to help secure your Subscription Merchant Account

Our dedicated team has negotiated on behalf of more than 12,000 clients.  We understand the back and forth and give and take of negotiating processing accounts for high risk merchants, including hundreds of subscription service merchant accounts.

Membership Site Merchant Account Application