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7 Things You Should Know About Having a High Risk Merchant Account

7 Things You Should Know About Having a High Risk Merchant Account

Conceptual business illustration with the words merchant account
Having a high risk merchant account is a necessity for some businesses. Learn more about this type of account with these seven facts.

If you have an online business, accepting credit cards as a form of payment is absolutely critical to your success and your bottom line.

But if your business is considered high risk, finding the right match can be a daunting task.

So, what do you need to know about having a high risk merchant account before you begin looking for the right company to serve your needs? Here are nine things you should be aware of before you make a commitment.

1. Determine if Your Business is Considered High Risk

Before you select a merchant processor, you need to know if your business is even considered to be high risk. The criteria can vary widely between providers, but one of the first things they look at is if your industry typically has a high rate of fraud or chargebacks.

If you’re not operating from the United States, this is another potential indicator of high risk. Certain categories like firearms, drug paraphernalia, or even auction sites may also be considered high risk. Find out if you fall into this category first so you can be prepared for the next steps.

2. Prepare for Higher Fees and Longer Contract Terms

If you have a high risk merchant account, you can expect to pay more in processing charges and billed account fees. The reason is that your processor is taking you on as a risk, so they’re passing the cost of that risk on to you.

You’ll also likely have to keep your contract with the processor longer than you would if you were not a high-risk client. On average, high-risk accounts must stay with the same processor for three years or even longer.

An auto renewal clause is usually included which can force you to remain an ongoing customer for periods of a one-year minimum after each renewal. If you want to cancel, you’ll likely get hit with an early termination fee.

3. Check Available Plans for Your High Risk Merchant Account

Merchant processing plans can vary, so shop around until you find one that offers terms you can live with. Traditionally, these fees are charged on something called an interchange-plus pricing plan, although your rates will be higher than a low or no-risk account.

Find out if you can get a flat-rate pricing plan which will make billing a lot easier. If you discover that a merchant processor is charging extremely high per-transaction charges, you may want to steer clear. Compare rates and plans until you find one that’s within a reasonable amount.

4. Be Aware of Rolling Reserves

The term rolling reserves refers to money that is set aside from the proceeds of your sales in order to cover certain expenses. These reserves will help pay for things like chargebacks, and they’re put in place to protect the merchant processor.

Since many high-risk accounts tend to go out business, these reserves are there to cover any unexpected costs to the merchant processing company. If you’re new in business, you can almost guarantee that this is a requirement. However, as time goes on, the rolling reserves should decrease as long as your account remains in good standing.

5. Read the Fine Print

Any reputable merchant processor will give you a contract that spells out all of your fees and terms. Make sure you read this thoroughly before you make a commitment.

Look closely for different clauses that could cause you to pay even more than you expected. Some companies claim to specialize in high-risk accounts so they feel that they can charge their merchant accounts exorbitant fees. Do your homework and never sign anything until you’re completely comfortable with the terms and the cost.

If you’re ever in doubt about a potential merchant processor, ask your fellow business owners who they recommend. You can also read reviews online to find out which ones most high-risk customers are happy with, and which ones to avoid.

6. Security Measures will be Added

A quality payment processor will add some layers of additional security to your account. This can actually benefit you since it will help prevent fraudulent transactions and dishonest chargeback claims.

Requiring things like CVV2 verification is a good thing since it protects you and your processor from fraud. Ask your provider about what kinds of security measures they take to protect themselves and your business from unscrupulous transactions.

7. Develop a Good Track Record

If you really want to lower the costs associated with a high risk merchant account, work diligently to prove your salt. This could mean anything from reducing or completely eliminating chargebacks to consistently showing a profit for a long period of time.

The longer your business does well and maintains its reputation, the better off you’ll be in the eyes of the merchant processor. Some providers may even reward their high-risk accounts with lower rolling reserves over time or even reducing fees as time goes on.

Ask several potential merchant processors what kind of benefits they offer high-risk accounts if they do well. You might be surprised at the progress and positive benefits you can reap once the business is more established.

Success is Possible

Even if you operate a high-risk business, there’s no need to despair. With a few helpful bits of information and a little research, you can find a quality high risk merchant account that will serve your needs well.

Visit our website for more information about: High Risk Merchant Services.

How to Find High Risk Merchant Services for Ecommerce Stores

20 years ago, it was amazing to have a book come right to your door from a little online store called Amazon.

Today, what’s even more amazing is that you can run your own little online store and send your own crafts and other products to your customers’ doors. Online services like Shopify and Miva have made it easy to open stores, bringing in side-hustle level money or even creating full-time gigs.

Collecting money is a critical aspect in online business success. Luckily, the ecommerce platforms make it easy to connect with merchant processors to make accepting credit, debit, PayPal and more payments simple. You will need both a merchant service provider and a payment gateway. It may be a few steps, but accepting a wide variety of payments only takes filling in fields online. You the ecommerce platform about the merchant service and payment gateway you want and follow the instructions to connect both to your bank account and website.

The good news is that technology has progressed to the point where vendors can have a store without a website. Google Shopping, Facebook Stores and Instagram shops sidestep the need for a website. Merchants simply list their inventory on their ecommerce platform and feed it out through a line of code.

Even better, most ecommerce platforms accommodate any merchant service provider you choose. To pick the right one, consider your business’s potential expansion and make sure your plan will accommodate that growth. Also, ask the merchant account service what specific features they offer for ecommerce shops.

Test All Software and Hardware

Quality software and hardware require a trial run before unleashing your business upon a market. It also gives you a chance to check out the customer service that comes with your ecommerce platform and your merchant account. Run through some experimental purchases. Get this done because when a glitch occurs in real-time with a real customer, you want to be able to get it taken care of quickly and with little thought or research. You risk not only alienating customers but ending up with chargebacks and returns.

Understand Fees Involved

Merchant account service charge a percentage for all transactions plus a flat rate for each transaction and a fee for each month. If the merchant service is asking for application, setup, programming, annual or termination fees, be wary. These fees are often considered unethical, and the competent providers do not require them.

Depending on the type of ecommerce business you run, you may be better off paying more up front but allows you to have a greater number of transactions each month. You have to look at your business and crunch the numbers to see what works best for you.

Finally, look in the fine print for “transaction volume caps,” or other charges. These can eat into your profits. Set daily or monthly transaction caps could prompt your provider to shut your account down. That’s the last thing you want if a surge in sales arises during a promotional or holiday offer.

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4 Ways to Reduce Your Merchant Credit Card Processing Fees

Credit card processing fees just come with the territory. That customers spend 20 t0 50 percent more when using credit cards should reassure you that accepting them feeds your profits. Use these tips to keep even more of your profits when you reduce your merchant credit card processing fees.

Find the Processor that Wants You

Just as lenders can specialize in certain types of borrowers, processors like to stock their portfolios with merchants that meet carefully selected criteria. They marshal the software and hardware that caters to different transaction amounts and volumes. They may also design their offers by a merchant’s average ticket price (ATP) or lifetime value (LTV). That’s why you should evaluate several merchant processors to see which wants to work hardest for your business.

This said, make sure that processors offering low rates also provide sufficient services and aren’t hiding fees. When you find a possible processor, check its Better Business Bureau rating. Create a spreadsheet and get answers to the following questions:

· What is the total interest rate when including all fees?

· What are the application, cancellation, statement and service fees? Can these be waived?

· Do you require contracts? What are the terms?

· How can I get a lower fee per transaction?

Those not willing to work with you do not deserve your business. Review the answers other merchant account services. Always read the fine print.

Hardware Considerations

Leasing credit card terminal means you’ll end up paying up to 20 times the machine’s cost. Typically, leases run for three to five years. While the terminals cost $200 to $400 up front, leasing can run from $40 to $70 each month. Keep in mind that you can also consider mobile credit card readers that plug into smartphones. These include Paypal Here, SparkPay, Intuit GoPayment and more.

There are also a handful of new mobile credit card readers merchants can consider. These inexpensive devices plug into a smartphone or tablet and allow credit cards to be accepted from anywhere. Examples include Square, Etsy, Intuit GoPayment, Paypal Here, Spark Pay and Amazon Local Register. Evaluate them to determine which fit your sales type and volume.

Remember to Swipe Rather than Entering Manually

When the merchant enters the cardholder’s information manually, they’ll pay more in fees per transaction than if swiping the card. Accounting software Intuit tells us that this is because processors know that manually entered transactions can be more easily hacked by thieves. A credit card’s magnetic strip or EMV chip has the most state-of-the-art security features. When a merchant enters numbers manually, those security features are not engaged. With risk of fraud high with manual entry, processors balance their risk by charging more. If you have to retrain cashiers, do it.

Use Minimum Sales Amounts to Maximize Profits

Convenience stores and restaurants have credit card use minimums for good reason. Small transactions with thin margins can make the sale a money loser. Some merchants worry that a minimum could cut sales. If customers push back on this policy, explaining the costs involved usually helps them understand.

All it takes is putting up a note that says you accept credit cards, but require a minimum sale of $10 or $20. If a customer doesn’t understand, simply explain that the cost of processing plastic can be burdensome.

Today, all businesses must accept credit and debit cards. With all of the additional payment methods requiring a processor, no business can go without a merchant account. The fees involved should not scare you away from providing your customers a wide variety of ways to pay.

Merchant Services Help You Increase Your Sales – Call 1 (800) 950-0212

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Merchant Services / High Risk Merchant Accounts: Main 1-800-950-0212  Fax: 1-800-215-0217

 

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