Offshore Merchant Accounts

How to get an offshore merchant account, or trade without one.

Offshore Merchant Accounts

Most MAPs are chary of foreign businesses, being all too aware of the increased risks of charge-backs and disputed bills. Disputes are less easily settled when the merchant lies outside US jurisdiction, and business may be conducted by different codes of practice.

Since Maps cannot cover all eventualities, they usually play safe by refusing a merchant account.

Even more damning are:

• countries under US trade restrictions or embargoes
• countries with economic or social instability
• goods of antisocial nature: weapons, adult material

Additional Requirements

The small percentage of Maps that will entertain overseas businesses cover the extra risks by increasing both the requirements that have to be met, and the charges they impose. Expect a much stiffer treatment on:

• nature of your business
• credit-worthiness
• business records and tax returns
• reserves: 10-20% of receipts are commonly held back for 6 months; sometimes 100% of receipts are held back for 90 days.

Increased Charges

Overseas businesses will also face higher charges. Here is a representative comparison:

	US Business	Non-US Business
Setup Fee	$0 - $200	$300 - $1,500
Monthly statement fee	$0 - $20	$0 - $50
Monthly card processing	$15 - $25	$20 - $50
Minimum monthly account fee	$0 - $20	$25 - $50
Transaction charges: flat fee	$0.25 - $0.50	$0.50 - $1.00
Transaction charges: % value	2 - 3%	4 - 8%

Minimizing Difficulties and Charges

Faced with these charges, many foreign businesses use alternative methods of taking credit cards. But those that do persevere in obtaining a merchant account will commonly:

1. open a US bank account in the country of business, or

2. employ a MAP to

• open a US bank account ($300)
• set up a US trading address ($100/year)
• obtain US incorporation ($400 - $1,200/year)

3. find an incorporation company to set up a US company. The corporation so established will have to pay state and federal taxes, plus $125-$175/year for a registered agent if it doesn't otherwise have residence in the state. You'll find good listings of incorporation companies on the web directories and search engines under "incorporation services". Charges vary, depending on what is supplied.

More details on offshore merchant accounts, and ecommerce beyond the USA, are provided by our ebook.

 

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