Do you operate a business in an industry typically regarded as “high risk” due to complex legal concerns or a high risk of chargebacks and friendly fraud? There are many companies in this position, with a diverse range of affected industries, from health and beauty to adult entertainment to tech support and SEO. Often, it is incredibly difficult for these businesses to find payment processors to work with them at all. When you do find an opportunity to open a high-risk merchant account, the chance is likely to come with a number of strings attached – and ones you may not like to discover at that. Before you put pen to paper and sign any contract with a payment processor, be sure you know what to watch out for during your search.
1. Prepare for the Sticker Shock of Higher Fees
You expect to pay a certain fee for each transaction, of course, because that’s how payment processors make their money. However, when you’re classed as a “high risk” business, your processing fees are likely to be higher than average – much higher, in some cases. If you receive approval from the bank, chances are good you’ll face tiered fees that scale up based on the type of transaction you accept – potentially making some transactions less profitable. Higher transaction fees are an unfortunate cost of doing business in your industry, but it does not necessarily have to be that way.
2. Expect to Lock into a Long Contract
For a typical acquiring bank to feel comfortable working on a high-risk account, they will seek certain guarantees to lower their risk and increase the likelihood that the relationship is a profitable one for them. One way they accomplish this goal is by offering clients the opportunity to engage their services, but only if they sign a year-long contract. Not only does this have pitfalls of its own to discuss, but it also means you’re stuck with those high fees for long stretches at a time. For many, this can feel frustrating and unfair.
3. Don’t Be Surprised by Large Chargeback Fees
Chargebacks happen in every industry, but for those in your sector, they’re likely to happen more often – that’s why it’s “high risk,” after all. Unfortunately, that also means that the fees you incur when chargebacks occur will be higher than they are for other businesses. Not only do you have to cope with losing funds from your account, but you’ll need to pay for the inconvenience, too. Choosing the right payment processor can help you to secure a merchant account with a fairer fee structure.
4. Beware of the Big Freeze – the Account Freeze
What happens when your payment processor thinks that a run of recent transactions are likely to be reversed? They freeze your account and the funds inside. It’s as challenging a situation as it sounds, as merchants are often blindsided by account freezes owing to poor communication or a lack of notification regarding concerns related to transactional disputes. An account freeze is one of the most important risks to be aware of, as it can be financially damaging for a business if unanticipated.
5. Watch Out for Early Termination Fees and Liquidation Damages
Remember those contractual pitfalls we mentioned earlier? They consist of clauses in your contract governing early termination and your financial obligations in the event you decide you’d rather take your business elsewhere. If you choose to look for better service before your contract is completely up, expect to shell out an early termination fee that could be substantial. Your contract may also include clauses defining “liquidated damages,” or a figure intended to offset the loss of your business.
Partner with Premier One Payments for a Less Stressful Path to a Merchant Account
If you think it sounds like getting payment processors to play ball with your business is a stressful and frustrating experience, you wouldn’t be wrong. Traditionally, a high-risk merchant account came with many of these caveats, often making it harder for a business to improve its bottom line – and sometimes sinking them altogether when chargebacks began to appear. At Premier One Payments, though, we are at the forefront of an evolution in payment processing – the recognition that high-risk businesses deserve access to affordable and effective services, too.
Working alongside your business, we make it simple to gain more affordable access to merchant accounts, credit card processing both through physical and mobile POS systems as well as digitally, and all-important chargeback protection. With more sensible fee structures, less predatory contractual language, and more of a focus on a satisfying customer service experience, we’re well-equipped to support businesses in most high-risk industries. Find out more about how we can help you today.