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Everything You Need to Know About Adult Merchant Accounts

The most popular keyword in the world is sex and its various derivatives. [1] Millions of people buy adult-themed products over the internet, but aspiring entrepreneurs are often surprised to find that banks usually deny credit card processing to new adult-related businesses because they’re categorized as “high risk.”

The following FAQs can answer many of your questions about getting approved for credit card processing when you own an adult-themed business.

1. Question: Why is my adult-type business discriminated against by banks, which refuse to approve my credit card processing application?

Answer: Unfortunately, traditional banks consider adult-themed businesses high risk for many reasons. The first is that processors could become involved in illegal business operations if the films or products are illegal in some parts of the world. Underage children often try to buy products on these sites, and that could lead to lawsuits.

The other reason–and for banks, the most convincing–is that consumers often seek chargebacks because of dissatisfaction or guilt because they feel tricked into subscribing to specialty clubs. High chargeback rates over 2 percent can cause credit processors to lose money.

2. Question: What type of businesses are considered adult merchants?

Answer: Many companies can be considered adult merchants–from erotic bakers to dating sites. Some of the more common businesses that are classified as “high risk” adult merchants include:

  • Adult movies and films
  • X-rated bookstores
  • Massage businesses
  • Escort services
  • Dating websites
  • Strip clubs
  • Adult content membership sites
  • Sexually provocative clothing stores
  • Leather, lace and lingerie stores

3. Question: What options do I have to take payments over the internet?

Answer: Although there are a number of cryptocurrencies–such as Bitcoin–that could be used, but these payment methods are so specialized that you will greatly limit your customer base. The only practical alternative is to get approved for a merchant account. Fortunately, we approve 95 percent of so-called “high-risk” accounts.

We offer full-service credit card processing so that you can receive payments from anyone, and people can pay with ordinary credit and debit cards. There are, of course, some requirements.

You’ll need official government-issued identification, credit processing statements if you have them, bank account statements, Social Security number or EIN, information about your business and proof of ownership.

We approve most applications, but you could get in trouble if your chargeback rates become too high. That’s why we offer turnkey advice about providing a high level of customer service to prevent chargebacks.

You should also monitor product deliveries, send email receipts for each order and generally follow the best practices of digital marketing and sales.

4. Question: Are there any limits or red tape?

Answer: New accounts usually have a volume limit until the business has proven itself as financially responsible and successful. A typical credit card processing limit might be $100,000 or $200,000 per month.

If your account maintains a low chargeback rate, a good credit rating and money in the bank, your limit will be increased.

5. Question: How can I ensure a lower chargeback rate?

Answer: Regular communications and empathetic customer service are two ways to reduce chargeback rates. For example, adult merchants often remain unaware that customers are seeking a refund of the money they spent.

If you maintain customer contact, you’ll probably know when a customer requests a chargeback. You’ll be able to dispute the chargeback because the customer requested and received the product.

Many people are embarrassed when they buy adult products and try to deny that they did or claim the sale was a misunderstanding. You can also incorporate chargeback management software into your sales platform and use it to filter fraud and orders by minors.

It’s also important to inform customers how their sales or services will be charged. Adult-themed companies often use “plain” corporate titles that don’t reveal the type of products they sell.

This approach protects customer privacy. However, some customers don’t recognize the company’s name, so they dispute the transaction. That’s why it’s important to make clear what the billing name will be.

6. Question: What are the business classification codes for adult merchants?

Answer: There are many SIC and NAICS codes that relate to adult-themed businesses. Some of the most common include: [2]

  • 7299: Miscellaneous personal services
  • 5968: Direct marketing
  • 729903: Dating and escort services
  • 5945: Hobby, game and toy shops
  • 451211: Bookstores for adult magazines

There are many other codes where adult services might be the primary product. Almost any business could potentially fall under the watchful eye of insurance underwriters who decide to classify it as “high risk”–such as a local baker who bakes an erotic cake at a customer’s request.

There is quite a bit of crossover, and some businesses might sell a few adult-oriented products as a sideline and not be penalized as “high risk.”

If your business is denied credit card processing because it’s considered an adult-themed company, you have options.

We can approve you in just a few days, and you can process credit cards the same way that other legitimate businesses do.

 

 

References:

[1] Statisticbrain.com: Adult Film Industry Statistics & Demographics
https://www.statisticbrain.com/adult-film-industry-statistics-demographics/

[2] Osha.gov: SIC Division Structure
https://www.osha.gov/pls/imis/sic_manual.html

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