Every business strives to keep its customers as happy and satisfied as possible. In today’s digital world, part of that means giving them the chance to choose the payment option they want when purchasing a product or service. But, although ordinary businesses may have no problem accessing cashless payment processing solutions, high-risk merchants are hardly ever as lucky.
Processors often turn away any business that would potentially put their money at risk, and if they do agree to shake your hand, it usually comes after you’ve signed off on stringent terms and exorbitant rates.
Nevertheless, the situation isn’t entirely hopeless. Knowing what fees to expect when applying for a high-risk merchant account may help you avoid unpleasant surprises and maybe even get a reasonable deal.
What Are Merchant Account Fees?
A merchant account enables a business to accept cashless payments, primarily through credit and debit cards.
When a customer completes a purchase with a credit card, it typically takes a while for the card-issuing bank to authorize the transaction and release payment. A merchant account provider gives the seller faster access to the money by depositing the value of the purchase into their account and then retrieving the money owed from the customer’s bank. For this service, the provider charges a fee.
In addition to regular charges for each transaction, the processor may also charge monthly fees, as well as chargeback fees. For high-volume accounts, the costs normally average out at a percentage of overall volume. But for small businesses, merchant fees can put a strain on cash flow.
High-Risk Merchant Account Fees
Although the rates may vary from one provider to the next, high-risk merchant accounts are often significantly more expensive than regular accounts. Below are the charges to expect when applying for a high-risk account.
- Set-up fees
Paying the set-up fee will be the first step you take after your processor accepts you as a merchant. Although the set-up fee for high-risk merchant accounts can run to the thousands, some account provides may waive or reduce the charge to appeal to new applicants. At this point, it is crucial that you read the contract carefully to make sure that no account termination fees have been mentioned.
- Capture fees
Account providers will offer you a terminal with which you’ll be capturing card information. These mechanisms vary widely in cost, but a typical online or physical high-risk merchant account payment gateway may cost anywhere from $50 to several hundred dollars, depending on your preempted volume. High-risk accounts often come with limits to the number of transactions you can process, and most providers charge an additional per-sale fee after the limit.
- Processing fees
Most payment processors charge fixed per-month fees for processing, along with a fixed percentage of the value of each sale. Of course, high-risk merchants pay the most, so expect to cough up as much as 10 percent of your sales in processing fees.
High-risk merchants are prone to chargebacks, so, most high-risk processors will charge a fee for any disputed transactions, and non-compliance often leads to additional penalties.
A high-risk merchant account can be expensive, but it doesn’t have to bleed your business dry. Do your research based on the fees above, and identify the provider that is right for both your needs and your budget.