Evaluating Low vs. High-Risk Payment Processing: A Look at Providers such as Pay.cc
PinionNewswire — If youre running an online business, one of the first things you need to make sure of is that you have a credit card payment processor. After all, how else do you expect customers to pay for your products? And even if you run a small business, having the option to let customers pay with their credit card is a big convenience. Since very few people carry cash with them, being able to pay with their cards is a major advantage.
What Are High-Risk Merchant Accounts?
When you sign up with a company that will accept credit card payments, such as Pay.cc, theyll likely assess your risk level first. Usually, theyll evaluate whether youre categorized as a high-risk business before accepting your application. Being labeled as high-risk means that your business has a high likelihood of experiencing chargebacks.
In the event that youre considered a high-risk merchant, youll have to pay a premium for your services. That being said, some providers may even choose to reject your application. This depends on the companys criteria for high-risk businesses and the risk that comes with your business.
Before you can get approved for an account with a credit card payment processing company, theyll decide if youre a low or high-risk merchant. Therefore, theyll go over your business information and see if theres any reasonable risk that comes with processing credit card transactions for your business.
Theyll look at factors like how long your business has operated, your current reputation, and other factors. Youll be labelled as a high-risk merchant if:
- Businesses in your industry tend to have a higher chargeback ratio
- Businesses in your industry are at a high risk of fraud
- Youve just started your business and have limited experience with processing credit card payments
- If your business doesnt have a good reputation among customers
- Your company isnt financially stable
- Your personal credit score is below an appropriate level
- If many customers live outside the country
- If your customers use the product months after purchasing it
They will categorize your company as low risk in certain cases, such as when:
- Your business processes transactions worth less than $20,000 each month
- The average ticket size for your business is much less than $50.
- Companies in your industry tend to have a low to zero chargeback ratio
- The industry is low-risk overall
How Are High-Risk Accounts Different From Regular Ones
Your high-risk merchant account is different from a regular one in many ways. For starters, youll have to pay increased payment processing fees. Usually, credit card processing companies may charge a typical small business 2.6 percent plus 10 cents per purchase. On the other hand, a high-risk merchant may pay a higher rate of around 2.95 percent plus 25 cents.
So, if the purchase costs $50, a regular retail business would need to pay the payment processor $1.40, while a high-risk business may have to pay $1.73. This is just an example, so if youre approaching a payment processor like Pay.cc, its best to ask about their charges.
You Should Expect a Longer Application Process
If your small business requires a standard account, it may only take a couple of minutes for your application to get approval. However, high-risk accounts may require multiple days before you get approved.
Additionally, the credit card payment processing service may ask you to provide further information about your business. For instance, theyll ask about your credit score, and you may have to give bank statements.
How A Credit Card Payment Processor Decides
In most cases, business owners dont apply for a merchant account on their own. Rather, theyll get a payment processor who will try to find a suitable banking partner to open the business's merchant account. So, theyll start by trying to understand your business by having an open conversation with you.
Theyll ask about your financial situation and which factors make you a high-risk business. Most likely, there will be various factors that make you high-risk, but the more information you can give, the better.
Next, theyll think about what it means to partner with you in the long term. Payment processing companies like Pay.cc have a financial stake because they always assume that the merchant wont cover a chargeback. Thats when a customer disputes the charges, and funds have to be returned. So, every payment processor uses certain tools to see if the application is a good fit.
High-risk businesses may have some trouble finding a good match when seeking payment processing companies. However, that doesnt mean its impossible. Rest assured that by taking certain measures, youll be able to secure a reliable payment processor willing to accommodate your high-risk business. That being said, remember to prepare for higher fees and a longer application process.
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