The vast majority of online shoppers today will rely on the speed and convenience of credit card payments when shopping online. Thee online businesses that are not able to process these payment methods are at a considerable disadvantage and will miss out on a significant amount of sales. This creates a dilemma for those businesses that are considered to be in the “high-risk” business sector due to the nature of their sales or business type. They are faced with the essential need to accept credit cards for online sales, but will likely have to pay higher rates and fees for the ability to do so. Many times a high risk account requires that you also use a high risk payment gateway, such as the NMI Gateway. Many times, however the payment processor will allow you to process cards however you choose to do so..
The banks and financial organizations that provide credit card processing services are reluctant to accept the risk associated with certain business categories or transaction types. Some of the business types that fall into this high-risk category experience higher than average levels of fraud or are at an increased risk for chargebacks. For example, businesses that take payments for reservations made many months in advance may be considered high risk, because they have an increased potential for chargebacks if customers cancel and want their money back.
High-Risk Merchant Account Providers can seem hard to find. Although the outlook seems grim, there are providers that will setup riskier businesses types to accept credit cards. These providers specialize in high-risk merchant account services. While the ability to accept credit cards is essential, it will likely come at an increased cost when dealing with a high-risk provider. The key is to find the right provider that offers the services you need without taking too big of a bite out of your bottom line. The first thing to understand is that, due to the increased risk they take, high-risk merchant account providers will charge higher fees in comparison with regular providers.
Fees for a High-Risk Merchant Account
As you might expect, monthly fees for your high-risk merchant account will be considerably higher than those of regular credit card processing. Here is where your provider will be offsetting the risks involved in allowing a high-risk business to process credit cards payments. The steep costs of high-risk merchant processing are also something to factor into the equation. Most often these are available in a multi-level pricing plan, although some providers offer different arrangements. No matter what you find, you will probably be facing higher costs for each transaction. The increased costs may amount to as much as twice the cost of regular credit card processing transactions. This is where shopping around will pay off with huge savings in the long run.
The Rolling Reserve
Here is another option that some high-risk merchant account providers will offer their clients, especially those that have not acquired an extensive credit history just yet. Non-high-risk businesses will also use this option often when they are just starting up. A small portion of cash is set aside from each transaction to save for a time when your account may have an unexpected cost. The good news about this option is that the costs for the Rolling Reserve will get progressively smaller as time goes by. The biggest problem with this plan is that it can seriously squelch cash flow and without careful organization, making the business less than profitable.
High-Risk Merchant Account Contracts
You probably expected that the fees for each transaction would be a bit higher, but that is a more obvious point to examine. The subtle dangers will lie in the contracts that must be signed to gain access to one of these accounts. Often times, the mandatory time frame can be too long to make the deal cost-effective. This has been a point of complaint about many high-risk merchants, and some providers are shaving months off their contract periods. The dangers lie in becoming bound in a very restrictive contract with your high-risk merchant account provider that leaves no options to be released from the contract until the time period is concluded. The payment gateway may be looked at differently than the merchant account itself. Sometimes a very high cancellation fee is included for those who would like to opt-out. There will be providers that offer shorter contracts, but this is not the only thing to look for in a suitable provider. In the end, be sure to read the contracts carefully and take special notice of the procedures and stipulations for terminating the contract before its time.
