Entrepreneurs think of themselves as honest, ethical businesspeople, but banks, acquirers, and payment service providers often see things differently. All of these entities process money, and they’re obligated to classify all merchants as low, medium, or high risk. In this guide, business owners can learn several reasons their companies may be required to pay for High Risk Credit Card Processing.
Although most companies are honest and upfront about recurring charges, others aren’t, and that’s why automatic debits may put a business into the high-risk category. Customers may be unaware that the company wants to process regular automatic payments, which can lead to unpleasant surprises when they open the monthly statement.
In most cases, a customer has up to six months to request a chargeback. If a customer purchases a monthly plan, the merchant is obligated to provide a month’s worth of service. In this case, the customer has six months from the last day of service to file for a chargeback, which makes it more likely to occur. When a merchant category has a higher incidence of chargebacks, they’re considered high-risk.
Many cloud services are put into the high-risk category because it is hard to ascertain what’s going on. For instance, in a file-sharing service, there could be illegal things happening. The money laundering risk is high, which means that processors consider these businesses to be a high risk.
Online ticket sellers may inadvertently find themselves paying more for credit card processing. These merchants typically accept advance payments because they sell tickets for events that will happen in weeks or even months. Things happen, plans change, and chargebacks may occur, which makes online ticket sales a high-risk category.
High Ticket Amounts
This relates to chargebacks as well. The higher the average transaction amount, the more risk the processor incurs. When a big transaction is charged back, that means the merchant loses twice: when they refund the payment and when they lose the money they paid in card processing fees.
Next Steps for High-Risk Merchants
If the company is trustworthy, they’ll be able to find a provider that gives them the necessary help. While high-risk card processing is a bit more expensive and the application process is more involved, it’s a necessity in some cases. Call or click today to get more information or to apply.