High-Risk Credit Card Processing
High-Risk Credit Card Processing
Introduction To High-Rish Credit Card Processing
If your business is considered “high-risk,” it will be much harder for you to avoid expensive credit card processing fees. You may find it nearly impossible to even open a merchant account. The truth of the matter is that, while standard businesses enjoy low processing fees and quick access to premium merchant accounts, high-risk businesses like yours are often at a disadvantage.
If your business is deemed high-risk, you’ll undoubtedly find it more difficult to find a credit card processing company to accept you. This means that you will likely experience difficulties in moving beyond cash only payments. The unfortunate reality is that not all credit card companies are willing to take risks with sellers they deem potentially harmful. You might have to do a bit of digging to find the credit card processing company right for your business.
In this guide, we’ll go over high-risk credit card processing and merchant services, explaining the concept and examining ways to combat it. We’ll also give practical advice on what to look out for in high-risk credit card processing companies so that you can find the business that is the right fit. By following the information in this guide, you’ll be one step closer to establishing a relationship with a quality card processor who can help you grow your business.
So saying that, let’s begin!
What is High-Risk Credit Card Processing?
You may be thinking, “What is high-risk credit card processing, anyway?” What does the concept mean, and how is it applied? Before we go any further, it’s important that we define the term “high-risk” and figure out who applies it to your business. Understanding why your business is considered risky is a key part of finding out how high-risk merchant services work. Make sure to keep the following information in mind as you move forward.
For starters, it’s important to remember that every credit card processor is different. It’s individual companies determining risk and not any law or governing entity. You will find that different organizations have different criteria for what makes up “high-risk.” This can make it tricky to figure out if your business is considered risky or not. Despite this, there are a few general guidelines that can help you determine whether your business may be considered high-risk. Let’s take a look at a few:
1. Sensitive Content
This one is pretty straightforward. If you sell makeup for a living, you will likely never be considered “high-risk.” Yet, if you sell adult paraphernalia or content, you’ll find that you are almost universally blacklisted by standard credit card processing companies. This is because sensitive content is considered high-risk for most processing businesses.
For this reason, you want to examine the nature of your business before you contact any sellers. Ask yourself, “Could the content of my business be considered sensitive?” If so, it’s better to find businesses that offer merchant accounts to companies like yours.
Say, for example, that you sell firearms. As a general rule, you can expect most credit card processing companies to consider you “high-risk.” With that being said, you’ll find that there are specific niche firearm merchant credit processing companies that are willing to do business with you. It’s better to contact these companies directly instead of wasting time contacting processing companies that likely will refuse to do business with you.
2. Offshore Business
Most credit card processing companies perceive high-risk in foreign businesses that primarily sell to United States clientele. If your business is not based in the country of your desired credit card processing company, you’ll likely be forced to find a more accommodating option. The simple truth is that offshore businesses are more subject to fraud, meaning fewer companies are willing to take a chance covering your business.
3. Poor Credit
You might be surprised to learn that your personal credit score can affect you here. If your credit is less than desirable, it’s possible that some credit card processing companies will refuse to do business with you. With that being said, you may not have any problems. If your business is successful, G-rated, and properly managed, it’s possible that many credit card processing companies will look the other way. This means that your best bet is contacting credit card processing companies beforehand to see if they are willing to offer you a merchant account.
4. High Fraud Rate
Unfortunately, some industries are more prone to fraud than others. If your business operates in one of those industries, your company will almost be considered “high-risk.” For this reason, it’s encouraged to get in touch with high-risk credit card processing companies to find out more about their high-risk merchant services. Keep in mind that processing companies are generally looking at consumer fraud and not business fraud. In these situations, your business may still be targeted even if everything you do is completely above ground.
5. Illicit Marketing Behavior
If businesses in your niche use illicit marketing tactics it’s likely that you will simply be denied a standard merchant account by association. Those types of tactics are spam calling, texting, or e-mailing, to reach out to new clientele. This means that you should be aware of the type of industry you are working in so that you can find a credit card processing company that works for you. More likely than not, you may be forced to find a high-risk credit card processing business that is willing to work with your specific type of business.
Not sure if your business fits into one of these categories? Check out this list below. While not exhaustive, this list contains a selection of business types that are generally flagged as high-risk by credit card processors:
• Collection Agencies
• eBay Stores
• Fantasy Sports Stores
• Financial Planning
• Life Coaching
• Pawn Shops
• SEO Businesses
• Vitamin Sellers
If your business is anywhere on this list, it’s likely that you will be turned down by major credit card processing companies. For this reason, you may need to go elsewhere to start your merchant account. In the next section, well examine what options are available for you.
What Options are Available to You
By now, you might have noticed that your business is likely included in the “high-risk” category. If so, don’t worry. We know the struggle. While it’s true that high-risk merchants often find more difficulty in finding the right credit card processor, there’s no reason to despair. There exist a few options that you can take advantage of if you find yourself in this situation.
For starters, you may consider contacting a specialized high-risk credit card purchasing company. These companies focus on providing specialized merchant services for companies that are deemed high-risk. While the services of these companies are typically more expensive than standard pricing for non-high risk businesses, unfortunately, that’s the way it is). You’ll find that these companies often offer better-contracting options and prices.
Even if you are high risk, it’s possible that a major credit card processing company will be willing to take a risk with you. Despite this, it’s likely that they will demand highly inflated prices to cover the risk. If you’re a small business or are starting, you may simply not have the funds to do so. For this reason, it’s important that you turn to specialized companies that understand the nature of your business and are prepared to offer you a better deal. By doing so, you may give yourself access to unbeatable rates that you can’t find anywhere else.
That being said, you should expect to pay a little more. In general, high-risk businesses are asked to pay:
• Higher Transaction Fees
Don’t be surprised if you are asked to pay nearly double the standard going rate per individual transaction. High-risk comes with high costs. Even if you manage to find a specialized high-risk merchant services provider you can afford, it’s probable that you’ll still be paying higher rates than the cupcake shop across the street. You’ll probably also find it more difficult to haggle your prices down. This is particularly true if you work in an especially sensitive field. Say, for instance, that you are looking to obtain firearm merchant services. Even under the best circumstances, you should expect to pay much higher than normal rates for standard transactions.
• Early Termination Costs
High-risk merchant services providers know that they are taking a gamble with you when they offer you a contract. For this reason, many of them include specific early termination fees in their contracts to prevent you from leaving. Unfortunately, you may be bound to the same company for up to five years, sometimes with immediate renewal afterward. This means that you should check beforehand so that you don’t end up getting stuck with a company that’s charging you more than they should.
• Higher Monthly Payments
You’ll also be asked to pay higher-than-average monthly payments for your services. This makes shopping around even more important, as higher costs could prove too much for businesses that are smaller or expect a larger volume of electronic transactions. While choosing a specialized high-risk merchant services provider can help you ease the costs of your monthly payments a bit, remember that you’ll still be paying rates that are more expensive than standard fees. This is important to keep in mind as you plan your budget and reach out to different providers.
Finding the right high-risk credit card processing company can be tough. For this reason, pay attention to the following tips so that you can increase the chance that you find a service provider right for you.
1. Don’t Rush It
We get it: if you’ve been turned down by scores of processing companies, it can be tempting to simply accept the first offer you receive. That being said, it’s crucial that you pay attention to the details of the company who is making the offer. Often, “high-risk” merchant service providers don’t live up to the reputation they claim. For this reason, you’ll want to make sure that you talk with the provider extensively, as well as do your research. Find out what customers are saying, and make sure you look into other providers, as well.
2. Start with the Big Names
As you search for a high-risk merchant who will accept your business, you’ll want to start with the big names. You may be able to find what appear to be “sweeter” deals by going with smaller companies, but bigger companies come with a more established reputation and more reviews. This can help you find a company that you can trust.
If you’re not sure if your company is considered high-risk, ask. Remember that every company is different. There’s a chance that you can pass as a standard company, even if you think you’re toeing the line. This means that your best bet is always to contact traditional service providers and inquire about your status. Doing so could help you find lower rates and better contracts.
The Bottom Line
For high-risk companies, finding the right credit card processing company can often be a pain. As much as it hurts, high-risk is generally associated with high costs. This means that it could be difficult for you to find a business willing to cater to your services. Despite this, several sellers have had success in pairing with high-risk credit card processing companies that are a better fit to accommodate their circumstances. For this reason, it’s important to find out what your options are so that you can find the right high-risk merchant for you.
Think your business may be high-risk? Use the information in this guide to make finding your next credit card processing company easier than ever!