What To Know About High-Risk Credit Card Processing

Thursday, November 21st, 2019

Credit card processing capabilities for your business isn’t a matter of choice in a world where the number of people paying with cash is rapidly decreasing. Cash isn’t even an option if your business operates through an online storefront.

In order for your business to succeed you need to be able to process debit and credit cards. Unfortunately, if your business has been classified as high-risk, it may be difficult to secure a processor through traditional avenues.

High-Risk Industries

There are a variety of reasons why a business might be classified as “high risk” though the end result is almost always the same.

If your business is in an industry with a high likelihood of chargebacks, or “friendly fraud”, banks will most likely decline doing business with you. Chargebacks are when customers dispute a charge from your company, causing a refund to be issued and further fees to be paid by your business. This is especially likely in industries that operate online, have recurring billing or sell goods or services at high prices.

Businesses can also be considered high-risk if they operate in an industry that does not conform to mainstream ideals, such as cannabis, firearms, adult entertainment, gambling and other similar industries.

If your business has been denied credit card processing services because of your classification as being high-risk, it can feel like you’re out of options. However, there are solutions through companies that specialize in high-risk credit card processing, such as Best Payment Providers.

High-Risk Credit Card Processing Accounts

Working with a specialist for high-risk credit card processing can open doors for you that you might have feared shut. However, being accepted for high-risk credit card processing does not negate the actual risk.

While these specialist companies can provide you with an extra measure of security through software, the risk of chargebacks is still relevant.

In order to mitigate this risk, fees for high-risk credit card processing are typically higher than for companies that are not considered high-risk. High-risk processors will not be able to provide as flexible a plan as if you were not high-risk and they also require more documentation in order for you to open an account. This is to establish the legitimacy of your business and prove that you’re worth taking the risk for.

You should also expect to have either a cash reserve or rolling fund. This refers to an amount of profit set aside in order to cover any chargeback costs. Funds are usually held on a rolling basis and released within six months. While it may seem inconvenient, it helps to protect both you and the processor from getting hit with unexpected costs.

Applying for a High-risk Credit Card Processing

It may take time to gather the following information, but once your application and documentation are submitted, it usually only takes 24-48 hours for your account to be approved. You can then begin processing credit cards right away.

In order to process your application for a high-risk merchant account, most processors require the following:

  • A valid ID
  • A bank letter or voided check
  • A secure and working website
  • Three months of bank statements
  • Three months of your most recent processing statements, when applicable
  • An SSN or EIN
  • A chargeback ratio that’s less than 2%

If you have any questions about what you need to open an account, you can reach out to the specialists at Best Payment Providers for knowledgeable answers and support.

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