If you are running a high-risk business, then you might face the challenging task of getting a payment processor. Some payment processors might decline your application just on the basis of a high-risk account. On the other hand, some payment processors can take some measures to offset the risk.
Payment processing service providers, like Pay.cc, can take into consideration different ways to mitigate the risks. However, the process won’t be the same as the regular merchant accounts. So, what are some things that set the high-risk and regular merchant accounts apart? Let’s discuss more about it in this article.
Lengthy Process for Application
If you go for a high-risk merchant account, then the service provider might require you to provide detailed information about your business. This is done to analyze the risk profile and get a better idea of the past patterns of your finances.
Usually, the high risk payment processing will go through your business processing history and partnerships. They might also go through your personal credit history to look for any bad credit. In addition to that, the payment service provider would look through every possible information or data regarding your finances.
Higher Chargeback Fees
One of the most significant differences between high-risk and regular accounts is that they need to pay a higher chargeback fee to the payment processor. As a result, it can have a significant impact on your cost of doing business. And it can be much higher for businesses with a high chargeback ratio.
These charges would allow you to compensate for the risks of the additional charges. The rates for the chargebacks can be anywhere from $25 to $95. If your business is an industry, such as clothing, which has a higher back ratio, then it could see a major impact in the short and long run.
Payment Processing Fees to Be Higher
Another important thing that sets high-risk merchant accounts apart from regular accounts is the high payment processing fees. If you go for the regular account, then payment processing fees would be anywhere around 0.3% beyond the interchange rate.
On the other hand, it can go up to 1.5% apart from the interchange rate for the high-risk merchant account. It is vital to note that the interchange rate may differ from service provider to service provider. But in general, you would have to incur higher fees for higher risk.
Limit in the Credit or Debit Processing
There are a few credit card processors that would prevent you from processing transactions apart from a certain limit. They would simply not let you process any more transactions if the sales volume reached the cap.
This is because the credit card processors believe that the risks may be compounded if you are dealing with high volumes. Therefore, they would set the transactions you can process. The cap would vary from provider to provider so you would have to check with them first.
Greater Requirements for Cash Reserve
The payment solution providers might also want to have a certain amount of reserves for the business. They can keep a threshold for this reserve in various different ways, such as:
Upfront Reserve – The high-risk payment processor will ask for an amount from the business upfront. In a few instances, the processor would also withhold all the transactions until the merchant doesn’t pay the said amount.
Rolling Reserve – The high-risk payment processor can retain a percentage of each transaction that you process, but you will receive that money later. For example, if there is a rolling agreement for six months, then you’ll get the balance from January in the month of July.
Capped Reserve – The high-risk payment processor would retain a specific percentage from each transaction. It would continue to do so until the cash reserves touched the predetermined level. While the per-transaction deductions may stop, the reserve will continue to remain in its place.
Last but not least, there can be some additional requirements apart from the ones mentioned in this article. It would depend on the type of your business. Therefore, some providers would require you to fulfill additional requirements when availing their services.
For instance, your business might be selling age-restricted products. In that case, the payment processor might require you to incorporate tools to ensure that your products don’t end up in the hands of underage customers. They would require you to complete that part before they can approve your application.
Choosing the right payment service provider for the high-risk merchant account is highly important. It ensures that your businesses can offer customers with the convenience of making payments through online payment options. Luckily, there are various notable and reliable options available in the market, such as Pay.cc, for you to choose from.