Running a business takes the skills of a magician and the perseverance of a gladiator. Well, it is not quite a dramatic as that, but you get the point. Business owners and operators have their plates full. When it comes to processing credit cards, not much thought is put into the company on the other end of the line that makes processing credit cards happen.
You should know that credit card processing companies put considerable thought into selecting the businesses they decide to work with for processing credit card payments.
Payment processors classify two types of risks for businesses: Low risk and high risk. Why does the level of risk associated with your business matter? The answer is the higher the risk, the more a business can expect to pay for credit card processing services.
Some businesses will never escape from the high risk category because of the niche in which they operate. As a business owner, there are some thing you can do to mitigate risk, which can eventually lead to lower monthly credit card processing fees. Double Helix, who specialize in high risk merchant accounts, share this overview to prepare you to negotiate and obtain the best rates.
Criteria Credit Card Processors Use to Calculate Risk
The company that processes your credit card transactions determines the level of risk based on a number of factors. After understanding the level of risk, a credit card processor such as Double Helix Processing has to determine how to treat the level of risk. Is the high risk high enough to warrant the application of exorbitant fees, or does the risk barely sit above the high threshold, which in turn means a lower monthly rate for processing credit card transactions.
Here are the criteria used by companies to assign payment processing risk:
Frequent Chargebacks
The most important criterion credit card processors use is the chargeback rate experienced by a business operating in a certain niche. This criterion is about the customer base, not the business practices implemented by the high-risk merchant. Some industries simply attract customers that fail to cover purchases or worse, commit outright fraud by using a phony credit card.
High Price Products
The higher the price of a product, the more likely a credit card processor assigns a higher risk to a merchant. Just a couple of flawed credit card transactions can cost a processor hundreds of dollars. Yes, the revenue generated by high-price products is attractive, but the downside of possible credit defaults counters the benefit of a stronger cash flow.
Marketing Scam Tactics
Businesses that operate in a niche that have the reputation for running unethical marketing scams take a hit when the time comes to set up a credit card processing system. This criterion is strictly a label applied by processors for every business operating in the same niche.
Poor Personal Credit
As the only criterion that focuses on a personal, not a business issue, your credit rating is an important factor for credit card processing companies to consider. Many processors are wary of working with a business owner that cannot get his or her personal finances in order.
Businesses Operating Offshore
Companies that have headquarters offshore, but sell primarily to American consumers, carry the high-risk label because of the weak banking regulations imposed by many countries. This is especially true for offshore companies headquartered in Caribbean nations.
This brings us to our next question: what business niches do credit card processors consider to be high-risk?
- Gaming
- Lotteries/Sweepstakes
- Mail or phone sales
- Debt Collections
- Nightclubs
- Telemarketing
- Fantasy sports
- Life coaching
- Print subscriptions
- Automotive brokers
How High-Risk Merchants Should Shop for Credit Card Processing Services
If your business falls within one of the high-risk categories, you still have to shop for a processor that has your best business interests in mind. The reputation of a processing company is vitally important to ensure flawless credit card transactions.
Consistent and Efficient Customer Support
Processing credit cards invokes Murphy’s Law: whatever can go wrong, will go wrong. From a machine the suddenly breaks down to a slow digital connection, you need to work with a processor that operates a top-rated customer service department. You need to have access to customer service outside of normal business hours, especially if you operate a retail business like a restaurant or a grocery store.
Transparent Pricing
Make sure every fee is listed in the terms of service contract. Like some credit card companies, some processors slip in hidden fees that apply to processing credit card transactions for high-risk merchants. You need to know what the surcharge is for your high-risk business to work with a credit card processing company.
Superior Security
You not only have to build trust with a credit card processing company, you also have to maintain the trust your customers have in your business to protect sensitive personal data, such as bank account numbers and other personal finance data. The best processors deliver superior security that prevents criminals from stealing identities.
Advanced Technology
You cannot afford to have your business saddled with outdated credit card processing technology. Just because you run a high-risk business does not mean you have to settle for inferior digital services.
Payment Flexibility
The best processors handle a wide variety of credit card transactions, including credit cards issued by foreign financial institutions. Companies that process credit cards should work with banks that offer affordable rates for businesses that operate in your high-risk niche.
Finally, experience matters for high-risk businesses. You want to work with a company that has developed a record of providing flawless transactions for credit cards.
