A high risk credit card processing for high-risk merchant accounts is a payment processing system. Banks and financial institutes deem certain businesses high risk because the businesses have a history of chargebacks and refunds. Due to the extensive refunds or chargebacks and to protect themselves from frauds, banks may put a rolling reserve to redeem the potential fraudulent and chargebacks amount. The processor charges higher fees due to the risk, and companies with bulk sales or businesses having an average credit transaction above 500 dollars are liable to receive this service.
Industries and businesses that are more likely to get chargebacks or are more prone to cancellations require a high-risk merchant account. Companies that possess low rate refunds and chargebacks enjoy standard merchant account services. These businesses have a clean history free of chargebacks and have credit transactions that are less than 500 dollars. Examples of high-risk businesses are the travel industry, gambling, online gaming, SEO services, dating sites, adult-themed sites, etc. High volume cyclical or recurring payments such as subscriptions are also considered high risk due to their volatile nature.
Important high-risk credit card processing aspects are:
1. Rolling reserve
This rolling reserve is the amount held back for merchants that possess a high risk to the banks. The credit card processing companies extract this amount and reserve it from your daily transactions. This amount includes a monetary guarantee and protection against your business breakdown or negative reinforcements. A rolling reserve provides financial security against chargebacks and frauds. Usually, 10 percent of the amount is set aside from your daily transaction. However, the acquiring bank can also charge a higher rate according to the risk and uncertainties associated with the business. The credit card company then releases the amount within 90 days to the merchants.
2. Fees and additional charges
The chargeback fees and other fees are twice as much as the low-risk merchant providers pay. Further, bank levies set up payment gateway charges, cancellation charges, and similar charges that could pose a grave threat to your profit margins. According to the nature and risk of your business, these charges are likely to be elevated. However, if your business is doing huge transactions regularly, you can negotiate with the payment processors about the transaction fees and other charges.
3. Minimum reserve
The minimum reserve is similar to rolling reserve charges. Here, the merchants keep a portion of the minimum amount with the credit card processing companies. The balance required is to be retained with credit processors all the time. You can meet the present number of the minimum reserve with one lump sum payment or on a percentage basis. But, it is a must to maintain minimum funds as it provides another layer of protection against uncertainties. Credit card processors are looking to mitigate risk and gain security against the volatility of business. Some volatile industries such as cannabis and cryptocurrency are at high risk of fluctuations. Here, these reserves put the credit card companies at ease.
4. Flexibility and growth
When you opt for high-risk credit card processing, it is necessary to consider your business size and nature. You need to make some modifications and alterations to your business as it grows over the years. But if you are stuck in a long-term contract with your credit card processors, then you will have to pay extra despite not wanting to. The flexibility of making changes according to your business needs is essential, and it should come from both sides, the merchants and credit processing companies. Top card processing agencies understand this and provide solutions that will help nurture your business revenue.
5. Security of merchant’s account
Security and safety of your funds are of utmost importance in any business. Leading card companies know that for business health and financial wellbeing, security is paramount. Safety issues and data breaches have become increasingly common. That is why they provide 3d secured payment processing, ensuring protected financial transactions and data security. Expert merchant account providers in high risk have excellent protection that keeps your online financial transactions tough to hack. They have top-of-the-line methods for business and customer record-keeping. All this, in turn, leads to a reduction in credit card frauds and chargebacks.
Choosing a perfect high-risk credit card processor
First, make a list of the best high-risk credit card processing companies that specialize in your field. All sectors such as financial, pharmaceutical, retail have their individually specialized merchant account providers that specifically target an industry. After drawing the list, extensively study all details about their policies. Understand their service charges and know whether you are paying a monthly fee or per-transaction fee. If the card processor considers your business risky, they can charge high fees as high as 5% per transaction.
Although finance is essential and transaction fees constitute a principal aspect in choosing high-risk credit card processors, you should not ignore other features such as security, customer service, additional services, etc. Also, inquiries about supported payment options and other value-adding services such as mobile payments, POS terminals, etc. Lastly, also consider the contract term that best suits your business needs. Do not get locked into long-term contracts as businesses today are volatile and can change anytime. It is evident that you wouldn’t want to pay high rates when you can be eligible for better charges in the future.
The ideal high-risk credit processing company should provide fundamental features for your specified business requirements. Every business is different and requires diverse solutions. Considering vital aspects such as rolling reserve, minimum reserve, transaction charges, security, and flexibility before choosing a payment provider can prove beneficial. Other features such as technology, customer support, transparent pricing, customization are also important. High-risk credit card processors provide heavy protection against chargebacks and frauds while expanding your business. Acceptance of payment in various currencies opens doors to global markets, increasing profits. While high-risk merchant accounts come with higher risk, and you may have to pay a hefty amount as transaction fees, they can open new opportunities and increase revenue for the business.