Merchant Accounts for Pawn Shops

Pawn Shop Merchant Accounts

For centuries, pawn shops have played an essential role in local economies, though their function is often overlooked or stigmatized. Pawnbrokers have existed since the Medieval era, providing average citizens with a simple and prompt means of obtaining a secured loan in order to meet emergency expenses. Borrowers can come in with their valuable items and immediately receive a loan without worrying about paperwork, credit checks, or approval from a bank. At the same time, they offer customers the opportunity to find quality merchandise in excellent condition at affordable prices. The demand for these services has not decreased over the past several centuries, and pawn shops remain thriving businesses regardless of the economic climate. During more difficult financial times, their services as emergency lenders are in high demand, and when people are more prosperous, the reasonable prices that pawn shops offer for high-quality goods are greatly valued.

Pawnbroker Merchant Accounts

Despite the reliable demand for the services provided by a pawn shop, aspiring pawnbrokers and veteran shop owners looking to expand their businesses will quickly find that not all aspects of running a modern pawn shop are simple. In the twenty-first century, having a merchant account capable of processing credit and debit transactions is practically a necessity for any business, and pawn shops are no exception. However, finding pawnbroker merchant accounts offered for remotely reasonable rates is quite a challenge. The payment processing companies that offer merchant accounts to business owners categorize certain industries and types of business as inherently “high risk,” and many institutions outright refuse to offer merchant accounts to businesses that fall into this category. Most processing companies that are willing to work with so-called “high risk” merchants tend to charge much higher monthly and per-transaction rates for these accounts, and place other conditions on the accounts that tie up a portion of the merchant’s profits in a reserve against chargebacks. Finding pawn shop merchant accounts that are affordable for a new business or existing can be a daunting task.

Why are Merchant Accounts for Pawn Shops High Risk?

Many business owners seeking pawnbroker merchant accounts find themselves wondering why their industry has been slapped with the “high risk” label. Much of the problem comes down to the lingering stigma that unfortunately surrounds the very idea of pawn shops in the public imagination. The stereotype is that pawn shops are rife with stolen merchandise. In reality, only one item in a thousand on the shelves of a pawn shop is ever identified to have been illicitly obtained, and pawn shops operate under licensing and regulation by the government to protect against unlawful activity, but as far as financial institutions are concerned, even the perception that this sort of activity takes place represents too much risk. Other factors influence the “high risk” classification as well: other businesses that sell second-hand merchandise or collectible items are often burdened with this categorization. The “risk” in question is the burden of economic liability undertaken by the payment processing company – in the event of chargebacks or fraud, the ultimate financial risk belongs to the institution that processed the transaction. Taken together, it is essentially inevitable that pawn shop merchant accounts will be labeled “high risk,” despite the profitable nature of the business.

Some payment card processing companies are, of course, willing to take on “high risk” merchants, or even specialize in providing high-risk merchant accounts. It’s important to bear in mind, however, when comparing providers of merchant accounts for pawn shops, that not all accounts are created equal. In addition to comparing rates and fees, you should ensure that the pawnbroker merchant accounts you consider offer all the features your business will need in order to succeed.

  1. Payment Card Processing – Your business needs to be able to accept credit and debit card transactions from your customers, whether they are purchasing merchandise from your shop or repaying loans they have taken out with you.
  2. Check Processing & Drafting – Although personal checks are far less commonly used than they were in the past, it’s valuable to have the option of accepting them. It is almost always advisable to give customers more options for paying you. As a lender, a pawnbroker needs to be able to pay customers when they come in to pawn their items. Pawn shop merchant accounts that allow you to cut checks help with keeping records of pawn transactions and help you avoid depleting your on-hand cash reserves when customers pawn larger-ticket items.
  3. Recurring/Automated Billing – Pawnbroker merchant accounts that give your borrowers the option of setting up automatic payments with their debit or credit card are a valuable asset. They not only provide convenience to the customer, but they also help you ensure that you will be paid consistently and on time, making your incoming revenue stream from loans more reliable.
  4. E-Commerce – In the modern era, you need not be limited to making sales only to those customers near enough to come into your brick-and-mortar store. Increasingly, pawn shops are posting some or all of their inventory online to reach a much wider pool of potential customers. Of course, it goes without saying that making sales online requires the ability to accept online orders. Many pawn shop merchant accounts with ecommerce options also offer a payment gateway, completing your online storefront and making it easy for you to accept internet-based sales transactions.
  5. Security – Keeping your customers’ payment information secure is essential for both brick-and-mortar store sales and ecommerce transactions, though customers are particularly sensitive to the security risks associated with online shopping. Your merchant account should come with the security and support necessary to protect your customers’ information and inspire their trust.
  6. Chargeback Policy – This is one of the ways in which pawnbroker merchant accounts often vary the most; some payment processors will offer pawn shop merchant accounts that have seemingly low transaction and monthly rates, but will stiffly penalize you for every chargeback. In any business dealing in previously owned merchandise, it is unfortunately common for customers to decide they are unsatisfied with their purchase and issue a chargeback rather than reaching out to the business owner to resolve the issue. When choosing among merchant accounts for pawn shops, select one that doesn’t unduly burden merchants for unavoidable chargebacks.

Payment Processing for Pawnshops and Pawn Brokers

The most important thing to keep in mind when trying to find a merchant account for your business is to shop around. Compare the rates and terms offered by a variety of payment processing institutions for their pawnbroker merchant accounts, and don’t be afraid to ask questions. A good merchant account provider will work with you to find the best solution for your individual business’s needs at a reasonable price, and will offer comprehensive support should you have any questions or concerns. Other factors may also affect which merchant account is right for your business, including the average volume and size of transactions you process per month and whether you accept international transactions or foreign currencies. A representative for your merchant account provider should be able to help you navigate these issues and determine which merchant account is ideal for your business at present, as well as explain what your options are as your business grows in the future.


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