Many times business owners are confused as to why their business is required to establish a high risk merchant account in order to accept credit card payments. One of the most common questions we hear is “Why should I need a high risk payment processing account?” After all selling furniture, SEO services, or magazines doesn’t seem to pose much “risk” – right? High risk payment processing is about a lot more than what you are selling and more about the perceived risk to the acquiring bank. High risk payment processing requires a credible merchant service provider with the experience and transparency to establish a dependable high risk merchant account for credit card payment processing so that you can focus on your business not constantly searching for a new provider. A lot of merchant service providers simply decline any business deemed to high risk. While others take advantage of high risk businesses with poor service and outrageous rates. So what is high risk payment processing and how can you establish a merchant account with a provider that you can depend on? Download our checklist about why you may need high risk payment processing.
Let’s start with what high risk payment processing is.
As many of you know, your business can be considered high risk even if you are not in the adult or travel industries. This is because industries, business models, and individual businesses are ranked by sponsoring (or acquiring) banks and the card brands (Visa, MasterCard, Etc..) based on that bank’s risk of chargebacks and fraud. The acquiring bank is held initially liable for any chargebacks that or fraud your business incurs. High risk merchant accounts are required to accept credit cards if your business is considered morally questionable, to be at high risk of fraud, has a high probability or history of chargebacks, or is financially questionable. By putting a business into a high risk merchant account the bank creates more strict underwriting guidelines, maintains a dedicated team of risk assessors to flag potentially fraudulent transactions, and increases fees to pay for these needs. This is in an effort to mitigate the bank’s financial risk on any given account.
Why do the banks consider your business high risk?
There are a lot factors that go into determining if a business is a high risk to the bank. First and foremost is the business’ product and how it is perceived by the public or the bank. If your business is in the Adult, Tobacco, MLM, Firearms, gaming, or other similar industries you are considered to be high risk because the product is considered by the bank to be either morally questionable or potentially brand damaging to their brand. Secondly is the industry’s history of chargebacks and/or fraud. For instance, travel agencies or online SEO Services are considered to be high risk because the industry has a high rate of chargebacks. An international online merchant selling just about anything is a target for hackers and that can place them into a high risk category. The third factor will determine whether or not your merchant account is high risk is a combination of creditworthiness and business financials. In other words if your personal credit has a recent bankruptcy on it or if you are just getting started in business cannot show sufficient cash flow to support your business (or potential chargebacks) then you may be required to establish a high risk merchant account. The bottom line is that anything which may increase a bank’s exposure to financial liability will call for more stringent underwriting and, unfortunately, higher fees.
What are the best steps to take when looking for a high risk payment processing account?
Unfortunately there are a lot of salesmen advertising their high risk merchant services who simply do not have the experience or credible banking partnerships to provide high quality, dependable, and reputable high risk merchant accounts. So, the first step is do your due diligence on the companies you vet as your high risk merchant account provider. Make sure to ask them how long they have been working in the high risk sector, what bank they will be working with, and whether or not they are an ETA CPP (Electronic Transactions Association Certified Payment Professional). If the answer to any of these questions is met with silence it is time to call someone else. Secondly, DO NOT fill out multiple applications with multiple companies simultaneously. Not only is this a waste of your time (as it is likely many of the work with the same banks) but it can also prevent you from getting approved for a merchant account! Thirdly, always put together a complete application package with everything the underwriter has requested – incomplete packages are often put to the bottom of the pile or declined. Finally, before completing the application (neatly) and signing make sure to read the terms of service the rate sheet to understand if the terms are acceptable to you.
Bankcard Brokers has proudly been working with transparency and credibility while providing world class service to our domestic and international high risk clients for over a decade. Our experience and long standing banking partnerships with dozens of banks domestically and internationally allow us to offer the most dependable and affordable high risk payment processing services available. Give one of our ETA CPP associates a call today or simply click the button below to get a quote right away! Almost no matter what industry you work in we have a solution to fit your needs.