Businesses are classified as High Risk for many reasons, some have a history of high chargebacks or fraud; others simply operate within an industry that is considered High Risk. When comparing low-risk processing accounts to those offered to high-risk businesses there are many notable differences. Here is what Visa has to say about risk standards.
HIGH-RISK PROCESSING ACCOUNTS: WHAT TO EXPECT
Some processors are nothing more than con artists offering help to businesses, help that will come at a high cost backed by iron-clad contracts. Avoid falling victim to scammers by doing your research, and having your attorney read the fine print. You can also contact the Better Business Bureau for reports. Bottom line, when it comes to High-Risk Processing Accounts if it sounds too good to be true – then, unfortunately, it probably isn’t true.
High-Risk Processing Accounts often require Reserves. While some may see this as a processor betting against your failure; I assure you it is not as sinister as that. High-Risk businesses have higher instances of chargebacks and fraud attacks. Reserves are used to pay processing fees when a transaction is disputed and funds subsequently routed back to the cardholder. If you think about this logically, it makes perfect sense. Without the reserve funds, processors would end up having to pay those fees. Quickly making it not worth the risk to approve High-Risk merchants for processing accounts.
Types of Reserves:
- UP-FRONT RESERVE: All funds from credit card transactions are withheld until a required reserve balance is met.
- ROLLING RESERVE: A Percentage of daily credit card revenue is withheld for a limited time, then returned as other funds become available.
- FIXED (CAPPED) RESERVE: Similar to a rolling reserve, except that once the reserve cap is hit, additional funds will not be withheld until the reserve is depleted.
HIGHER FEES AND LENGTHY CONTRACTS
The risk level assigned to your business by processors is due to the higher probability of disputed and transactions. Disputes will often lead to costly chargebacks. Which in turn causes High-Risk Processing Accounts to have higher fees along with more severe contract terms than those offered to low-risk/traditional business types.
WHAT’S THE GOOD NEWS?
Okay, all that may sound bad; but in actuality, the relationship between high-risk merchants and processors can be extremely beneficial to both parties. Yes, high-risk processing accounts have higher rates and may require some withholdings; if not for the processors being willing to take the risk those merchants would otherwise not have the ability to accept credit card payments at all. The important thing to remember is to DO YOUR RESEARCH, make sure you Find the Right High-Risk Processor for your Business!
With 3 decades of industry experience, multiple direct-to-bank & processor relationships, TeamNPC provides both low and high-risk merchants access to the very best payment solutions backed by an award-winning support team.
Choosing a High-Risk Processor has never been so easy! Call today, or click here and we will contact you! CALL 800-455-4577