Running a business takes a magician's skills and a gladiator's perseverance. It is not quite as dramatic as that, but you get the point. Business owners and operators have their plates complete. When processing credit cards, not much thought is put into the company on the other end of the line, which 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 business risks: Low risk and high risk. Why does the level of risk associated with your business matter? 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 things you can do to mitigate risk, which can eventually lead to lower monthly credit card processing fees. Double Helix, specializing in high-risk merchant accounts, shares 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 risk level based on several factors. After understanding the level of risk, a credit card processor such as Double Helix Processing has to decide how to treat it. Is the high risk high enough to warrant the application of exorbitant fees, or does the risk barely sit above the high threshold, which means a lower monthly rate for processing credit card transactions?
Here are the criteria used by companies to assign payment processing risk:
Frequent Chargebacks
Credit card processors' mosprocessors'riterioneback rate experienced by a business operating in a specific niche. This criterion concerns the customer base, not the business practices implemented by the high-risk merchant. Some industries simply attract customers who fail to cover purchases or commit outright fraud by using a phony credit card.
High Price Products
The higher the product price, the more likely a credit card processor assigns a higher risk to a merchant. A few 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 more substantial cash flow.
Marketing Scam Tactics
Businesses in a niche with a reputation for running unethical marketing scams suffer when it comes time to set up a credit card processing system. This criterion is strictly a label applied by processors to 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 essential factor for credit card processing companies to consider. Many processors are wary of working with a business owner who needs help getting his or her personal finances in order.
Businesses Operating Offshore
Companies with 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 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 with your best 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 invoke Murphy’s Law: Murphy's'scan wMurphy'scanl goes wrong. From a machine that suddenly breaks down to a slow digital connection, you need to work with a processor that operates a top-rated customer service department. You also need to have access to customer service outside of regular business hours, mainly if you operate a retail business like a restaurant or a grocery store.
Transparent Pricing
Make sure every fee is listed in the 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 the surcharge 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 but also 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 must find a way to saddle your business with outdated credit card processing technology. You can still settle for inferior digital services even if you run a high-risk business.
Payment Flexibility
The best processors handle various 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.
