Convenience is the name of the game when it comes to payment solutions. Straightforward and secure payment processes are an integral part of the customer experience, which is why high-risk credit card processing solutions are well worth the investment.
One could argue that it’s actually high-risk merchants who really need to invest in payment solutions. After all, the term “high-risk” itself means that credit card companies may be hesitant to process your transactions based on the nature of your company.
That said, companies looking for high-risk credit card solutions are in luck. In this article, we’ll talk about everything you need to know about credit card processing for high risk merchants — from steps to choosing the right processing solutions to some helpful tips when it comes to using these new accounts.
Is My Business High-Risk At All?
First things first: you might be reading this article thinking to yourself, “Is my business even high-risk to begin with?”
Business.com notes that high risk merchants can get that designation because of “volatile revenue, poor cash reserves, bad credit, excessive chargebacks or industry-wide challenges.” The tricky thing is that high-risk designations are made under the discretion of the credit card merchant.
There are some industries that are generally regarded as high-risk. This could be because secure cash flow isn’t always guaranteed for businesses, incidents of fraud and refund rates occur more often within these industries, they sell items of high value, or they offer services that carry some legal risk. Examples include:
- Online casinos and/or gambling companies
- Travel and booking sites
- Telemarketing
- Ticket brokers
- Liquor
- Tobacco
- Debt collectors
- Affiliate marketing
- Adult entertainment
If your business operates within these industries, there’s a good chance your business will automatically be designated as high-risk. This means you’ll likely get a note from payment processors or accounting gateway systems noting that your account has been classified as such.
Ouch! My Business Is High-Risk!
So your business is classified as high-risk. What will credit card processing companies do? They will typically take several steps:
- Higher Fees and Rates: They often charge higher transaction fees and rates to offset the increased risk of chargebacks and fraud.
- Rolling Reserve: They may implement a rolling reserve, which is a portion of the transaction amount withheld for a certain period to cover potential chargebacks or refunds.
- Strict Underwriting Process: The underwriting process becomes more stringent, requiring additional documentation and scrutiny of the business's financial health, ownership, and operational practices.
- Monthly Transaction Limits: They may impose monthly transaction volume limits to mitigate risk exposure.
- Chargeback Management: Enhanced chargeback monitoring and management protocols are put in place to minimize the impact of disputes.
- Regular Account Reviews: Frequent reviews of the merchant account may be conducted to ensure compliance with terms and to monitor for any signs of increased risk.
What You Should Do
- Prepare Documentation: Have comprehensive documentation ready, including business financials, a detailed business plan, and information on owners and key personnel.
- Improve Security Measures: Implement robust security measures, including PCI DSS compliance, fraud detection tools, and secure payment gateways.
- Manage Chargebacks: Develop a proactive strategy for managing and disputing chargebacks, including clear refund policies and responsive customer service.
- Maintain Transparency: Be transparent about your business model and any factors that may contribute to the high-risk classification.
- Shop Around: Compare different processors to find the one offering the most favorable terms despite the high-risk classification.
- Stay Within Limits: Adhere to the transaction volume limits set by the processor to avoid account suspension or termination.
- Monitor Transactions: Regularly monitor your transactions for any unusual activity that could signal potential fraud or issues.
Step-by-Step Guide to Choosing the Right Credit Card Processing Solution
Credit card options are one in a million nowadays, with providers trying to constantly create accessible payment solutions for their clients. To help sift through all the noise, below are some points you need to consider when choosing the right credit card processing solution.
1. Find a POS System
What does your business require from a credit card processor, really?
For instance, if you run both a physical store and an online ordering system, you need a reliable POS system for in-store transactions and an efficient online payment gateway.
A POS (Point of Sale) system is the hardware and software used to manage sales transactions. Square provides an all-in-one POS system that includes a card reader, register, and software to track sales and inventory. You can purchase a POS system directly from the provider's website or authorized retailers.
Stripe and PayPal are good options because Stripe integrates well with online platforms, and PayPal is widely recognized and trusted by customers.
2. Compare Fees and Rates
Compare the fees and rates of different processors by creating a detailed spreadsheet listing transaction fees, monthly fees, setup fees, and any hidden charges.
For example, Square charges a flat rate per transaction, which simplifies budgeting, while PayPal's fees vary based on transaction type and volume. If your bakery processes many small transactions daily, understanding these costs helps you manage expenses effectively.
3. Check Integration Capabilities
Ensure the payment processor integrates seamlessly with your existing systems. For your bakery, if you use Shopify for your online store, choose a processor compatible with Shopify.
Stripe and PayPal are known for their easy integration with major e-commerce platforms, allowing for quick setup and smooth operations.
4. Review Security Features
Look for PCI DSS (Payment Card Industry Data Security Standard) compliance, which ensures the processor follows stringent security protocols. Additionally, features like tokenization and encryption add extra layers of security.
When looking for PCI DSS compliance, visit the processor’s website and look for information about their security measures. Contact their support team to confirm their compliance. Ensure the processor provides necessary security features like tokenization and encryption to protect customer data during transactions.
Authorize.net, for example, provides strong security features and compliance, making it a safe choice for handling customer data.
5. Evaluate Customer Support
Customer support can be a critical factor, especially if you encounter issues with transactions. Test the customer support of each provider by calling their support line or using their chat service.
For your business, reliable support ensures any payment issues are resolved quickly, preventing disruption in sales. Square offers 24/7 customer service and extensive online resources, which can be very helpful.
6. Read Reviews and Testimonials
Research reviews and testimonials from businesses similar to yours. Trustpilot and G2 provide honest feedback.
For example, you might find that other business owners in the same industry prefer Stripe for its reliability and ease of use, while others favor PayPal for its broad acceptance and user-friendly interface. This feedback can guide your decision based on real experiences.
7. Consider Contract Terms
Examine the contract terms offered by different processors. Some, like Stripe, offer month-to-month agreements, providing flexibility. Others might require long-term contracts with early termination fees.
Flexible terms are beneficial for your business as they allow you to switch providers without hefty penalties if your business needs change.
8. Evaluate Ease of Use
If you’re not particularly tech-savvy, opt for a user-friendly solution. Square and PayPal Here are known for their intuitive interfaces and straightforward setup processes. These systems often include step-by-step guides and support, making it easier for you to start accepting payments quickly.
For your business, this ease of use means less time spent on technical issues and more time focusing on your business.
9. Test the Processing Speed and Reliability
The speed at which funds are deposited into your account can impact your cash flow. For example, PayPal typically offers next-day deposits, which is a banger for businesses that need quick access to funds.
Testing how fast and reliable each processor is can help you avoid cash flow issues. Quick fund deposits ensure your bakery has the necessary cash flow to operate smoothly.
10. Consider Additional Features
Look for additional features that might benefit your business, such as analytics, invoicing, or loyalty programs.
Clover, for instance, offers a comprehensive suite of features, including detailed sales reports, inventory management, and customer loyalty programs. These features can help streamline your bakery's operations and enhance customer satisfaction.
