High Risk Merchant Processing 101
Many people who own businesses don’t realize that merchant services companies will often divide their clients into one of two categories: low-risk, and high-risk. Getting into the low-risk category means that you will likely be approved by almost any company, and will likely be privy to great credit card processing rates as well. High-risk clients, on the other hand, often find themselves struggling with even getting accepted by merchant services companies at times – let alone getting good rates! Here’s what every business owner needs to know about high-risk merchant processing.
Fact #1: It’s typically industry-specific.
Most merchant processing companies out there will clump a bunch of industries together as high-risk, simply because the nature of the industry makes them lawsuit-prone, refund-prone, and fraud-prone. Commonly risky companies include…
Google, Amazon, Yahoo, and eBay storesAdult-oriented companiesGambling enterprisesLife coachingCoupon programsAny “legal grey area” businesses
Fact #2: It will mean rates will be high…if you get approved.
This is just a natural effect of posing a risk to the company that you’re dealing with. If you’re really risky, they may even turn you away. This is something you need to prepare yourself for. If you’re really out there, look for a company that specializes in high-risk merchant processing.
Fact #3: Risk is in the eye of the beholder.
Risk isn’t a codified thing in the merchant services world. Shopping around might end up with you finding a group that doesn’t consider you high risk at all – and that’s a great thing. Some businesses may also be willing to let you mitigate the risk or negotiate rates down after long periods of time,.
Fact #4: Some high-risk merchant processing agreements may require you to put money down, or may bar you from certain services.
In order to reduce risk, some companies will end up asking you to agree to terms that would normally never be on the table with a low-risk company. This is because it would otherwise force them to reject you. If you are in deep red area in terms of risk, you may want to agree to those terms.
Believe it or not, many companies that are highly respectable are considered to be high-risk by merchant processing companies. It’s really not a blow to your image to be categorized as high-risk, and to a point, many companies actually fit that bill anyway. If you’ve been deemed to be high-risk, talk to a merchant services expert about what you can do to lower your interest rate and get a good deal.