Low Vs. High Risk Credit Card Processing

Wednesday, December 27th, 2017

Whether you like it or not, your businesses must go through the underwriting process traditional banks and payment service providers use to decide if you are good enough to run a merchant account and start on processing payments with them. If your business fails the test, they may offer you these services at higher rates, or completely turn you down. This decision typically depends on the level of risk the payment provider can comfortably bear.

What makes you a High Risk Merchant?

So how can you tell if a processor or bank would skate on thin ice for you? How do you know whether to apply for the normal low risk or directly go for a high risk merchant account? Here are the factors to look at:

• Is your company in an industry category with high chargeback rates?
• Do you have bad personal credit?
• Is your business starting up and hasn’t built a solid reputation so far
• Your  corporation isn’t  financially stable (i.e. doesn’t earn steady revenue)
• Do most of your clients buy months beforehand and enjoy the good or service much later? (like airline tickets)

If you responded yes for one or more, then providers will probably categorize you as a high risk. That said, the difference between low risk and high risk is not always life and death. At Best Payment Providers, there’s a remedy for everyone.

Consequences of being High Risk

Though payment providers will support your account, they risk losing if your business fails.

Here are the measures processors who specialize in high risk credit card processing take to mitigate liability;

• Charge you higher fees and a few extra charges
• Allow you to select from only a few and less flexible service options

Is it Possible to Be Low Risk?

Though most factors that make your business risky are things you cannot change— e.g. your industry category or how customers utilize your services— you can always try to change some of the remaining factors. So if you feel you’ll be branded high risk, ensure to reduce risks before submitting an application to the underwriters. Also ensure you revise your business structure, financial statements, and credit status.

Here are tips to help lower your risk:

• Implement a steady fraud prevention system to reduce chargebacks
• Concentrate on generating stable revenue and not just occasional large revenues
• Prove that you can uphold large processing volumes

Bottom Line

Reducing risks is a time consuming and costly procedure, but it prepares you for a less problematic future compared to when you dive into business with all these factors on your neck.