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Starting a new business is exhilarating, but it also comes with many risks. If your business falls into the high risk category for payment processing, you will need to overcome a few more hurdles than most low risk merchants to get a credit card processing account. You will need a credit card processor that specializes in high-risk accounts that also offers reasonable rates and terms. Credit card processors charge higher rates and impose additional conditions on high-risk companies or businesses. A high risk designation can result from volatile income, low cash reserves, bad credit, large chargebacks, or industry-wide difficulties.
What is high risk credit card processing?
A company must first open a merchant account with an acquiring bank via sharkprocessing.com to accept credit card payments. The cost of this service differs greatly depending on several criteria, including the type of business, the way transactions are carried out and the risk of loss in the past. The fees for high-risk businesses are naturally higher, and a specialized payment processor is often required. Due to the anticipated risks, processors generally avoid these “at risk†traders. The biggest danger to high risk traders is the higher likelihood of chargebacks, one of the many things that make this a concern.
Certain factors, such as the type of product or service offered, the average monthly sales amount, the regions in which the merchant sells and others, can significantly increase the likelihood of chargebacks, leaving banks and processors vulnerable to harm. million losses. Defending a bank (or processor) against the risk of many chargebacks is a high risk status, but conversely, too many chargebacks can make a merchant high risk. After relinquishing a merchant account due to too many chargebacks and adding to the terminated merchant file, merchants may be classified as high risk. Some may even be classified as high risk due to the industry in which they operate.
What should the ideal high-risk payment processor look like?
1. Security
You need a reliable chargeback prevention solution with a complex approach to security because high-risk merchants create more chargebacks or fraudulent activity. Fraud prevention tools, AI-based fraud controls, real-time notifications and other services are available on request.
2. Competence
For high risk merchant accounts, the duration of activity of the company and the expertise of its leaders are essential. Their understanding of particular sectors is also helpful.
3. Flexibility
Find a high-risk processor that allows you to use a variety of payment situations to meet all of your business requirements, even if your business is complicated. Make sure you can talk about fees, conditions, and services specific to your business.
4. Transparent pricing
On a payment processor’s website, find the cost structure. Make sure you understand how much it will cost and that there are no undisclosed or additional expenses. When you can’t receive specific information from a potential high-risk treatment partner, it’s time to worry. Also be aware that as your business grows, your rates may decrease.
Why Are High Risk Credit Card Processors Important?
1. Worldwide expansion
Many merchants, especially those in the e-commerce industry, are finding that the advantages of using a high-risk payment processor outweigh the disadvantages of higher processing fees to be competitive in an increasingly globalized market. . Limits on card transactions are imposed by normal or low-risk processors, which can stifle digital growth.
Processors, for example, restrict or prohibit low-risk traders from:
- Mainly dealing with cardless transactions.
- Buying and selling in different currencies.
- Sell ​​to customers in countries other than the United States, Canada, Western and Northern Europe, Japan, and Australia.
The potential income from online sales alone can make high-risk merchant accounts tempting; add the ability to sell in other places – and in more currencies – and the income prospects may outweigh the risks.
2. The earnings are unlimited
The ability of low risk retailers to generate revenue through credit cards is limited by potential processors. Low risk traders, for example, cannot:
- Make recurring payments available.
- Process over $ 20,000 to $ 25,000 each month.
- Accept credit card transactions over $ 500.
- Offer products or services to sell.
A recurring payment plan (subscription), on the other hand, can be a provider of long-term growth. Many merchants depend on the constant flow of money that installment billing and recurring payments can provide and find the cost of using a high-risk processor worth it. Traders who want the potential gains from large transactions are in the same boat.
3. Risky products can lead to higher profits.
A large number of items and services are considered too risky for low risk merchants by credit card networks. A company with one of the MCCs (merchant category codes) mentioned above is considered high risk by card issuers at a minimum:
- Services relating to the organization of travel.
- Traders who engage in outbound or inbound telemarketing.
- Bets, which include lotteries, casino gambling chips, and off-track and on-track betting.
- Dispensaries and pharmacies.
- Cigar shops and sale of cigarettes without credit.
These are just a few of the MCCs that have been “blacklistedâ€. Because of these limitations, selling items or services in some of the more lucrative industries is difficult, if not impossible. A high risk merchant account allows a business to sell almost anything.
4. Chargebacks that are not a threat
Excessive chargebacks rarely result in the termination of a high-risk merchant account. The trader may face higher fines, but his business will not be compromised. Of course, the goal is to keep chargebacks to a minimum, but the merchant doesn’t have to worry about a bad month.
Conclusion
High risk has the potential for high return, but banks may not always see it that way. The processing of payment transactions for high-risk businesses is called high-risk credit card processing. Most payment processors and aggregators cannot disclose accurate rate and charge data for your specific high-risk business needs on their websites, so contact a sales representative and most importantly do your research. A good place to start is with a credit card payment processor that has a solid reputation for providing excellent customer service and support to all customers, including high risk ones.
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