With the ongoing technological advancements of today's society, a large percentage of overall financial transactions are completed with a credit or debit card. Many people no longer keep cash in their wallets, meaning that for your business to thrive, you need to be able to accept debit and credit card payments any time your doors are open. However, this may not be as simple as it sounds for some types of businesses.
If your small business has been turned down for processing services, had your merchant account suddenly shut down, or lacks the capability to process online credit card payments, your future success might require a high-risk merchant account.
Are You a High-Risk Merchant?
If you’ve been turned down by a payment processing provider or your merchant account was shut down, it may be because you’re considered a high-risk business. Banks identify merchants who are allegedly at a higher risk of chargebacks, which cost their institutions money. By refusing or limiting services to high-risk merchants, banks can supposedly reduce the financial impact to their institution in the event of a chargeback.
Unfortunately, discriminating against businesses for alleged high-risk activity isn't an exact science. There’s no single definition of what constitutes a high risk in credit card processing; each financial institution has unique criteria they use to determine how to classify merchants. That said, many of the criteria are the same across institutions. You may be classified as a high-risk merchant if you:
- Have experienced a high rate of chargeback activity
- Operate your business in an industry that is predetermined to be high risk for a variety of reasons, such as subscription-based products or services
- You're a brand-new business or haven't been in business for long
- You have a bad credit history or have filed bankruptcy in the past
- If you operate exclusively online with card-not-present transactions
- If you process international transactions
Banks and other merchant services providers can also label your business high-risk based on other factors, many of which are subjective. If you're labeled high-risk, you may not be able to obtain a merchant account with certain providers or you may be charged exorbitant fees, all of which can make it exceptionally difficult for you to conduct business. Fees can cut into your profits or force you to pass the cost on to your customers by raising the prices of your products or services. Limited merchant services also put your business at risk if you are subject to a chargeback; you may be left with little to no recourse to recoup the money you lost.
Find the Right High-Risk Payment Processing Provider
Many large merchant account providers will refuse to process transactions for high-risk businesses, which limits the options that are available to you. With so few processors to choose from, merchants often find themselves opening an account with the first provider who accepts them instead of doing their due diligence and looking for reputable, experienced processors that specialize in high-risk merchant accounts.
This usually causes more problems for merchants down the road, as your business may be especially vulnerable to chargebacks, fund holds, excessively high fees, or placement on the TMF/MATCH list. Ideally, you're comparing fees, services, security, and other features of multiple high-risk merchant account providers so you can determine which provider is the best fit for your business. While you do have fewer options as a high-risk merchant, there are providers that do still offer robust merchant services to businesses considered to be risky by other financial institutions.
Benefits of Working with a Specialist
It's generally in your best interest to look for a merchant services provider who specializes in high-risk accounts. Partnering with a processor that offers competitive options for high-risk merchants means you’ll have an experienced team working with banks on your behalf. Instead of being left to deal with chargebacks on your own because you're high-risk, most processors that specialize in these types of accounts will have chargeback protection practices in place to help you fight against fraud. When you work with a financial institution that specializes in high-risk merchant accounts, your business also gains multiple other ways to accept payments as well, including ACH, checks, loyalty cards, online payment gateways, POS solutions, and more.
Do You Need High-Risk Merchant Services?
Every business today needs to be able to process debit and credit card transactions efficiently and securely, but this is often challenging for high-risk businesses. If you need secure credit card processing but have been turned down or have gone through the hassle of having your merchant account suddenly shut down, BankCard Services can help you get set up with a high-risk merchant account quickly to create as little disruption to your business as possible. Contact us today to learn more about opening a high-risk payment processing account.