If your business is labeled as a ‘high-risk,’ you are going to be needing high-risk credit card processing. Unfortunately, being labeled as a high-risk business is going to bring your business nothing but trouble. Not only does it come with exorbitant fees attached, but you are going to be expected to pay more in initial costs just to set up the account as well. Below, we will be going over some of the top things that you should know about high-risk credit card processing and how to deal with being labeled as high-risk.
What Is High Risk Credit Card Processing?
Nowadays, every business must accept credit cards as a form of payment. Without accepting credit cards, you are essentially putting your business as a significant competitive disadvantage because you are going to be unable to accept payments from consumers that only use credit cards to make their purchases. Thus, you are going to need to obtain a merchant account from a bank which is typically going to come with much higher fees than if you weren’t deemed a high-risk account.
A high-risk status is a bank’s way of defending against the increased risk they are taking on by becoming your processor. The higher risk is likely due to the increased risk of chargebacks in your business or because of the nature of the industry that your business operates in. For example, businesses that sell high priced electronics are going to be at a much higher risk of suffering chargebacks than a grocery store business. Whereas, a business that operates in a grey market like selling CBD oil or supplements that might not be fully regulated is going to be deemed high-risk due to the industry they operate in.
Things To Know About High-Risk Merchant Accounts:
- Excessive Fees
When your business is labeled as high-risk, you can expect the excessive fees to be tacked onto your merchant account. All processors work under the direct assumption that any business that is deemed high-risk is going to end up producing many more chargebacks than a business that is not labeled high-risk. Chargebacks are a nightmare for credit card processing companies because they end up costing the processing company more money. Thus, the processing company ultimately works to reduce their risk by charging the high-risk companies more money in various fees right from the beginning. They are charged more money in initial setup fees and they are even forced to pay more in monthly fees. At the same time, they are also required to pay more in processing fees on top of the initial and monthly fees. Thus, if you are labeled a high-risk business, you are going to be dealing with excessive and rising fees all of the time.
- Chargeback Fees
When it comes to chargebacks, the processor typically requires the merchant to pay a fee to cover the administrative costs associated with processing it. Thus, a high-risk merchant is going to be required to pay a large fee that covers the costs of doing so. These fees are going to be much higher than you would expect to pay if you were not labeled high-risk. At the same time, if the high-risk merchant receives too many chargebacks in a short period of time, the fees and associated costs are only going to increase. Because the high-risk businesses are typically the businesses that experience the most chargebacks, it can really present a big problem with profitability.
How To Maintain A High-Risk Account?
When it comes to dealing with a high-risk account, the key to maintaining it comes down to minimizing chargebacks. While this can be a difficult task for a business that operates within an industry deemed high-risk or one that experiences a large number of chargebacks, it is something that has to be done to maintain a high-risk merchant account. Along with this, you must follow the processing agreement exactly as described to avoid dealing with problems that can come from not following the arrangement.
Does It Work?
While it might be very difficult to maintain a high-risk account, it is something that does work and has to work for a business to effectively continue accepting credit cards as payments. While getting a high-risk merchant processing account might seem as though it is more hassle than it might be worth for a business, it is not. With the way that consumers are now paying for goods and services, it is likely to be a deathblow to a business to not accept credit card payments at all. Thus, dealing with the excessive hassle that comes with accepting them with a high-risk account is considered necessary.
How To Find a High-Risk Credit Card Processing Company?
The best way to find a company that is going to be willing and able to provide you with credit card processing as a high-risk merchant is by going to standard credit card companies and banks to see whether or not they are willing and able to accept your application. Once you do this, you can try to look for specialized companies that are known to accept high-risk merchants. As long as you go into the situation knowing that you are going to be forced to pay more in various fees, you should be able to find one that accepts your merchant account. Check out merchant account solutions reviews when making a decision.
Overall, there are a lot of things that you are going to want to be aware of when it comes to dealing with high-risk processing accounts. By following the tips above and getting your business to minimize the number of chargebacks that you end up having to deal with, you should be able to reduce the perceived risk that comes with providing your business with merchant processing and you will be able to reduce your fees over time. The more chargebacks you have and the greyer areas your business operates in, the more you can expect to have to pay for a processor to provide the service to your business because you are going to pose a greater risk than they would like.