Being identified as a high risk merchant can mean many different things for your business. In some industries, this designation is a given. In others, it can be highly beneficial. One thing it means almost universally is that there are greater risks involved in processing your credit card payments and, as a result, greater costs.
Once your business is identified as a high risk business for credit card payment processors, you’ll find one of two things happens.
- Many processors simply won’t work with your business.
- Those that do, will charge higher rates and/or fees to offset their risks.
Understanding this will help you make better informed decisions as you shop around for your credit card processing needs as a high risk merchant.
High Risk Merchant Account Fees
Some of the fees are general payment processing fees all merchants pay for this service. Some fees associated with high risk merchant accounts, though, are specifically designed to help payment processors balance their risks in accepting these payments from your business.
They are either unique expenses solely for high risk merchants or they are increased beyond standard or low-risk merchant account holders. Some payment processors raise fees and charge additional ones, so make sure you’re looking at everything when you compare services to find the one that best meets your needs and your budget. Some of the fees you may encounter include:
- Set-up fees. These fees are common for many merchant accounts both low and high risk.
- Capture fees. Many high risk merchant service providers limit the number of transactions you can process within a month and charge additional fees per sale once you exceed the limit.
- Processing fees. This is common for both low and high risk merchant accounts, though high risk accounts often face higher processing fees.
- Penalties. Penalties can be problematic with high risk merchants facing penalties for all disputed transactions and additional fees or penalties for non-compliance.
Make sure you see if there is a way to reduce your processing fees and always read the fine print, so you know precisely what your fees and penalties are. Additionally, be aware that many high risk merchant services require substantial reserves to offset chargebacks. These reserves can cut into your cash flow in a big way.
It’s Not All About the Fees
Pricing and fees can be a big draw when you’re vetting potential processors to partner with for your high risk business. But if an offer sounds too good to be true, it probably is.
Make sure your potential processing partner truly specializes in high risk processing and knows how to get a high risk merchant account that will last you through the years. Some processors will say they manage high risk accounts without fully understanding everything involved. They often get merchants approved through low risk banks by altering the business classification and what products and/or services they use, only to have the account shut down later because they got flagged as high risk once the bank finds out more about your business.
Find a high risk merchant payment processing services provider that will work to get you approved honestly and ethically as a high risk merchant so you don’t have to deal with the stress of a closed account later on.
Tips for Reducing High Risk Processing Costs
Keeping costs down is a big deal for small- and mid-sized businesses. Even larger businesses and corporations are feeling the pinch these days and tightening belts. Being a high risk merchant means your options are limited, but it doesn’t mean you lack options altogether. Keep these tips in mind to help keep your payment processing costs as low as possible—even with a high risk merchant account.
- Avoid preset limits. They can hurt your ability to receive payments or cost your business dearly.
- Read your contract. Ask questions and get explanations for anything you don’t completely understand.
- Choose your processor carefully. Even though high risk accounts have fewer options for merchant services providers, you can be selective about which provider gets your business.
- Make security a priority. You can’t afford not to in this era of cyber attacks and computer crimes.
- Monitor your account regularly with online viewing and printable reports. Don’t work with payment processors that don’t offer transparency in the billing process. You need to know what you’re paying for and see that in action.
Being identified as a high risk merchant isn’t the end of the world for your business. If you follow the tips above and work to manage chargebacks for your business, you can enjoy a lucrative experience despite higher fees and higher risks associated with the way your business operates.
BankCard Services believes you are more than the risks associated with your business. We offer transparent billing practices and a wide range of services to help you manage chargebacks, understand fees, and reduce your risks. Contact us today to learn more about our high risk merchant payment processing services.
Mickael is an entrepreneur and the Co-founder of Bankcard Services. He is a family man and loves technology, innovation, and soccer.