Starting a new business venture is exhilarating, but it also comes with a lot of risks. If your business falls into the high-risk category for payment processing, you will have to overcome a few more obstacles than most low-risk merchants to get a credit card processing account. You will need a credit card processor specializing in high-risk accounts that also provides reasonable rates and terms. Credit card processors charge higher rates and impose additional terms and conditions on high-risk companies or enterprises. A high-risk designation can result from volatile revenue, low cash reserves, bad credit, extensive chargebacks, or industry-wide difficulties. 

What is high-risk credit card processing? 

A company must first open a merchant account with an acquiring bank through sharkprocessing.com to take credit card payments. The cost of this service differs greatly depending on several criteria, including the type of business, how transactions are carried out, and the risk of loss in the past. Fees for high-risk businesses are naturally higher, and a specialized payment processor is frequently necessary. Because of the anticipated risks, processors generally avoid these “risky” merchants. The biggest danger of high-risk merchants is the higher likelihood of chargebacks, one of several elements that make them a concern. 

Certain factors, such as the kind of product or service being offered, the average monthly dollar amount for sales, the regions to which the merchant sells, and others, can significantly increase the likelihood of chargebacks, leaving banks and processors vulnerable to millions in possible losses. A bank’s (or processor’s) defense against the risk of plenty of chargebacks is high-risk status, but conversely, too many chargebacks might make a merchant high-risk. After giving up a merchant account because of too many chargebacks and being added to the Terminated Merchant File, merchants might be classified as high-risk. Some may even be classified as high-risk due to the industry in which they function.

What should the ideal high-risk payment processor be like?

1. Security 

You need a dependable chargeback prevention solution with an intricate approach to security as high-risk merchants create more chargebacks or fraudulent activities. Fraud prevention tools, AI-based fraud checks, real-time notifications, and other services are available upon request.

2. Proficiency

For high-risk merchant accounts, the duration of time the company has been in business and the expertise of its leaders is critical. Their understanding of the particular sectors also helps.

3. Flexibility 

Find a high-risk processor that allows you to use various payment situations to meet all of your business’s requirements, even if your business is complicated. Make sure you can talk about the fees, terms, and services specific to your company.

4. Transparent pricing 

On a payment processor’s website, look for the cost structure. Make sure you understand how much it will cost and that there are no undisclosed or additional expenses. When you can’t receive specific information from a possible high-risk processing partner, it’s time to be concerned. Also, know that as your business grows, your rates may decrease.

Reasons why high-risk credit card processors are important?

1. Expansion around the globe 

Many merchants, especially those in the e-commerce industry, discover that the benefits of utilizing a high-risk payment processor exceed the disadvantages of higher processing fees to compete in an increasingly global market. Limits on card transactions are imposed by normal or low-risk processors, which can stifle digital growth. 

Processors, for example, restrict or prohibit low-risk merchants from:

• Predominantly dealing in card-not-present transactions.
• Buying and selling in different currencies.
• Selling to customers from countries other than the United States, Canada, Western and Northern Europe, Japan, and Australia.

The potential earnings from e-commerce sales alone can make high-risk merchant accounts tempting; throw in the possibility of selling in other places—and in more currencies—and the income prospects may just outweigh the risks.

2. Earnings are limitless 

Low-risk retailers’ ability to make income via credit cards is limited by potential processors. Low-risk merchants, for example, are unable to:

• Make recurring payments available.
• Process more than $20,000 to $25,000 each month.
• Accept credit card transactions with a value of more than $500.
• Offer products or services for sale.

A recurring payment (subscription) plan, on the other hand, can be a long-term supplier of growth. Several merchants depend on the consistent stream of money that installment billing and recurrent payments can provide and consider the cost of utilizing a high-risk processor to be well worth it. Merchants who want the potential gains of big-ticket transactions are in the same boat.

3. Risky products may result in higher profits. 

A vast number of items and services are considered too risky for low-risk merchants by credit card networks. A company with any of the MCCs  (merchant category codes) mentioned above is considered high-risk by the card issuers at the very least:

• Services relating to travel arrangements.
• Merchants who engage in outgoing or incoming telemarketing.
• Betting, which includes lotteries, casino gaming chips, and off-track and on-track betting.
• Dispensaries and drugstores.
• Cigar shops and sales of cigarettes without a credit.

These are just some of the MCCs that have been “blacklisted.” Due to these limitations, selling items or services in some of the most lucrative industries is difficult or impossible. A high-risk merchant account allows a company to sell almost anything.

4. Chargebacks that aren’t a threat 

Excessive chargebacks seldom result in the termination of a high-risk merchant account. The merchant may face larger fines, but their business will not be jeopardized. Of course, the aim is to reduce chargebacks to a minimum, but the merchant doesn’t have to be concerned about a bad month.

Conclusion 

High-risk carries a high payoff potential, but banks might not always perceive it that way. Payment transaction processing for high-risk enterprises is referred to as high-risk credit card processing. Most payment processors and aggregators cannot disclose accurate data on rates and fees for the needs of your specific high-risk business on their websites, so contact a sales representative and, most importantly, do your research. A great place to start is with a credit card payment processor that has a solid reputation for providing excellent customer care and assistance to all clients, including those who are high-risk.