I'm having trouble getting approved for a merchant account for my website. Basically I have expert users and users. Expert users provide a service through my website which they set their own rates. Users purchase the services, then pay me, I give 90% to the expert users.

I have been told this is factoring..

Is the way around this, a system like freelancer.com does? Where users deposit money into their freelancer account, then pay for the services they won? What are the negatives to this system?

What about sites like 99designs? They accept CC payments and then pay the winning designer. How are some sites doing this but I'm having so much trouble getting approved?

1 Answer 1


If you're in the US you can safely rule out using a true merchant account for this as no merchant account provider will touch this as it is factoring and is a huge no-no. This means you will be left with third party providers as your only options. This means higher fees and less flexibility but at least it becomes an option for you. I'm pretty sure SitePoint, who runs 99designs, uses Worldpay as their payment provider. I wouldn't be surprised if they have to have a large reserve to cover Worldpay if they suddenly get lots of chargebacks.

  • Thanks, but what about the deposit route? Like freelancer.com or elance.com .. basically you deposit funds into your "freelancer account" and then pay for services from that pool of money. That would be a workaround wouldn't it?
    – surpr
    Mar 15, 2011 at 15:27
  • Even if it isn't considered factoring, and I'm not sure if it's not, it is still very high risk which would make it very difficult to get a merchant account in the US anyway. You'd have to have a large reserve for sure and that's if someone would even considered it.
    – John Conde
    Mar 15, 2011 at 15:34

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