A business will open an offshore merchant account for a number of reasons. The account holder may do it to accept orders made with credit cards, to reduce their business’ current tax liability or even to set up an illegitimate business. For all businesses that sell products online or make international business transactions, an offshore merchant account is something to consider.
An offshore merchant account is a bank account that is located in a virtual banking space or at a location outside of a business’ country of operation. Like a normal bank account, these merchant accounts are a place in which a business can store money. Businesses can then draw checks on their account, request wire transfers and use their bank cards for all of the usual purposes. Unlike regular bank accounts, however, merchant accounts allow the merchants to accept payments made with credit cards, making them an attractive option in today’s increasingly credit card focused seller climate.
For new businesses, setting up a merchant account in the United States can be difficult. A large number of banks and credit card processors will not even consider the application of a new business. Others may want a large security deposit to set up the account, which can run well over $5,000. And when it comes time for payments, some banks may withhold them from the account holder as insurance against credit card chargebacks. A United States bank may even close the account suddenly if it suspects the merchant of participating in suspicious transactions.
Offshore merchant accounts are attractive to businesses for a number of reasons. For one, these accounts are not as much of a hassle to set up. The deposit requirements of setting the account up are much lower than in the United States, and sometimes there are no security deposits required at all. Furthermore, all transactions made with the seller are in United States dollars, so a business will receive the same amount of money for each product regardless of exchange rate fluctuations.
For online merchants, an offshore merchant account allows businesses to accept online payments even when their website crashes. This is due to the enhanced security features and backup generators that come with opening a merchant account.
To open an offshore merchant account, the account holder will have to provide notarized photocopies of documents such as a driver’s license and social security card. They will also need to supply the bank with references from other merchants and information about their current bank account.
By reducing a company’s tax liability and allowing them to accept any payments made with credit cards, offshore merchant accounts are an attractive option for online merchants and international businesses.