Business owners are often confused as to why they’re 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 less about 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. This way you can focus on your business and not constantly search for a new provider.
A lot of merchant service providers simply decline any business deemed too high of a risk. While others take advantage of these businesses with poor service and outrageous rates. Today we’ll answer two questions: 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 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 banks consider your business high risk?
There are a lot of factors that go into determining if a business is a high risk to the bank. First and foremost is the business’s product and how it’s 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. This is because the product is considered by the bank to be either morally questionable or potentially brand-damaging.
Second is the industry’s history of chargebacks and/or fraud. For instance, travel agencies and online SEO Services are considered high risk because the industries have high chargeback rates. An international online merchant, selling just about anything, is a target for hackers which places them into a high-risk category.
The third factor that will determine whether or not your merchant account is a high risk involves both your creditworthiness and business financials. In other words, if your personal credit has a recent bankruptcy on it or if you’re just getting started in business and cannot show sufficient cash flow to support your business 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.
Best steps for finding a reliable high-risk payment processing account?
Unfortunately, there’s a lot of salesmen advertising high-risk merchant services who simply don’t have the experience or credible banking partnerships to provide dependable, reputable high-risk merchant accounts.
So, the first step is to do your due diligence. Vet the companies you’re considering 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 they can’t answer any of these questions, 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 time since many processors work with the same banks, but it can prevent you from getting approved for a merchant account!
Thirdly, always put together a complete application package. Include 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 it, make sure to read the terms of service and rate sheet to ensure the terms are acceptable to you.
Bankcard Brokers has proudly been providing world-class service to our domestic and international high-risk clientele 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! No matter what industry you work in, we have a solution to fit your needs.