All eCommerce merchants must set up a payment method for their customers. This payment solution allows a buyer to pay for an item or a subscription service.
Credit card is a common payment method among online customers and businesses as well. And failure to add a credit card processing solution means denying your customers a favorite means of payment.
For business classified as risky, credit card processing turns into high-risk credit card processing. The risky classifications make it more difficult to get a merchant account, let alone a credit card processing solution.
What Makes a Business Risky?
The following reasons may lead to a risky classification:
- Your firm is in a regulated sector or sells a controlled product like the adult industry and tobacco.
- The nature of the product you sell or service you offer e.g. electronics, software,
- Your business involves extended chargeback liability waiting periods like annual subscriptions.
- Your sector has a reputation of high chargebacks.
- Your business is in the MATCH (Member Alert to Control High-Risk) list
These are some of the most common reasons the financial system may term you as high-risk. But some account providers or processor will turn you down for a list of other reasons.
A High-Risk Credit Card Processor is Your Best Option
If you’ve confirmed your business is risky, it is a better idea to partner with a high-risk credit card processor because they understand your needs better.
Most normal processors will reject your application, or charge you in the clouds if they onboard your high-risk.
How High-Risk Processors Differ
Because of the risks involved, payment processing rates for high-risk processors are higher than those of a low-risk processing.
Merchants with a high-risk classification face tougher conditions compared to their low-risk counterparts. Everything is a hassle all the way from account application to approval and even payment processing.
Furthermore, a risky merchant may be requested to set aside a reserve fund. Some processors will retain a lump sum if the business records high chargebacks.
What’s a Reserve Fund?
A merchant reserve fund is an emergency fund a processor asks a retailer to store in a separate account as they begin processing payments. It can be anything from 5% to 15% of a merchant’s deposits.
The processor retains this reserve fund for half-a-year or so, then later allows the business access to these finances. This fund acts as a security fund or collateral that the processor holds back for processing your risky payments.
Banking institutions and payment processors take this measure to reduce liability in the event of a major fraud or request for reverse charges.
Final Words
High-risk credit card processing is now available for merchants running businesses in risky sectors. Partner with the right service provider to get a fair and affordable deal.