High-risk credit card processing is not for everyone. If you're looking to take payments on your website, high-risk transactions are a way to get more money in return for the risks of chargebacks and fraud. But how do you know if this type of transaction would be right for you? This blog post will discuss what high-risk credit card processing is and who it's suitable for.
A high-risk credit card processing account allows you to accept transactions from customers with a higher risk of chargebacks. This increased risk has to do with the type of clientele these types of accounts usually cater towards: people who have less than ideal credit and payment history.
Organizations in specific industries can benefit significantly from accepting high-risk payments, such as payday loan companies or online gambling sites. These are businesses whose clients may not get approved at traditional banks due to poor financial records or past delinquencies. Thus, they would otherwise be unable to make purchases on your website if they had more stringent checkout processes.
For example, a business that provides loans to people with low credit scores or no job history may need to solicit customers via the web.
High-risk accounts are considered high risk because they have a higher chance of chargebacks due to the nature of the business. This means that if you're new, these transactions will be more difficult for your merchant service provider to get approved by their underwriting department.
If you run an eCommerce website or take payments online in general, high-risk accounts are great for you. Just remember that they can be more difficult to get approved for with your merchant service provider and will likely require a deposit on the account before it's activated (up to $1000). You'll also want to ensure you have an established website history so customers feel confident about using their card online.
When you apply for a merchant account, the payment processor essentially goes through an underwriting process. Although different processors have different standards, there are a few things that could raise red flags and cause your company to be labeled as "high risk."
Purchases at a premium: If your average purchase price is unusually high, you may be considered high-risk. The purchase price is directly proportional to the risk of fraud.
Products or services that are questionable: Illegal or semi-legal products a are obvious examples, but others vary by the payment processor.
Your business' physical location: If you sell to customers in the United States and your business is physically located in another country, you are more vulnerable to fraud.
Years in business: Merchant account providers are wary of customers who have little or no experience processing payments.
History of chargebacks or fraud with another merchant account provider: This will affect your application if you have a history of chargebacks or fraud with another merchant account provider.
Credit score issues on a personal or business level: A low credit score indicates to the payment processor that you are not good with money and are more vulnerable to fraud.
High-risk merchant accounts are often more difficult to get approved for but offer businesses the opportunity to take credit cards outside of their business location. Suppose you're an online retailer or regularly process payments through your website. In that case, high-risk transactions could be a good option if you don't have access to other types like PayPal or Stripe.
Suppose your account has been placed on hold or closed by the processor due to fraud activity. In that case, you mustn't attempt processing transactions. Fraudulent charges will not be covered under a merchant service agreement and could cause more harm than good if they're processed at this point.
In addition, opening new accounts with different processors while there is still fraudulent activity on your current account can impact future application approvals as well because of increased risk exposure. It might also result in additional fees from the initial provider for having multiple open accounts simultaneously (known as multi-terminal billing).
The best thing to do is file all necessary paperwork with your existing providers, so no further action needs to be taken on their part. Make sure you have any relevant information on hand that may be required to process refunds, such as the number of transactions or total dollar amount for each transaction in question. You'll also need to provide your legal names and contact details for each party involved so they can reach out directly if necessary.
Some examples include international customers making purchases with stolen credit cards, residents using fraudulent checks or wire transfers, business owners trying to avoid paying tax liabilities by filing false returns claiming a loss of income due to theft/fire/disaster, etc., employees who steal from employers through check-kiting schemes, criminals engaging in bribery scams via wire transfer requests disguised as legitimate contracting opportunities involving large corporations & more.
Businesses should have a written security plan with regular training on their employees.
Security plans include:
Conduct an assessment of your business, including the number and type of security threats you may face. This should include all areas where cash is handled or stored (from the front office to the back room) and any information about previous incidents at other businesses in similar industries that can be used as a reference point for determining possible risks.
Remember, Just because something has never happened before does not mean it will always remain that way moving forward; there are no guarantees when it comes to criminals. Having proper signage posted with clear instructions & contact details on how customers/employees can report suspicious activity they encounter while working within the store helps reduce potential losses from internal theft. It also lets them know who they turn to if necessary instead of taking matters into their own hands.
Businesses should also choose to work with a reputable processing company that has an extensive history in helping companies avoid fraudulent transactions and can provide them with strong security services to keep customers' personal information & social security numbers secure at all times.
High-risk credit card processing is not for everyone. If you are unsure, check with your merchant account provider or do some research online to see if it's right for you. It is often helpful to talk with other business owners who use high-risk credit card processing and ask how they like their processors.
You can also try searching on Google for reviews. If you are seriously considering high-risk credit card processing, make sure that your merchant account provider will be able to provide the level of service that meets your needs.
