A merchant is recognized as high-risk business if the bank believes acceptance of a merchant will lead to a higher than usual probability of financial loss. Dangerous businesses can still obtain merchant processing. But, it often takes expert consultancy to find out which acquiring bank is most effective to handle the specific needs of your high risk business.
It is actually well worth-while for any High-risk Business to seek the expertise of the payment processing professional who understands how best to package the application form and how to best present your small business for the right banking officer.
Furthermore, any company would want to consider establishing accounts at multiple bank and frequently in more than one jurisdiction. Like every other business operation, redundancy of payment processing accounts protects your small business from unforeseen contingencies.
Why do banks concern yourself with dangerous businesses? The answer is easy. Banks are worried about chargebacks.
A chargeback takes place when a consumer calls the issuing bank and disputes a charge. The customer has the right to dispute a charge up to 180 days after buying a product or service. Therefore, the bank is ultimately in charge of contingent liabilities of half a year on every purchase made employing a card.
There are many reasons for chargebacks. Some are valid. For example, a consumer may not have received merchandise or perhaps a merchant may refuse to refund money to an unhappy consumer. Sometimes a consumer calls the bank instead of calling the merchant resulting in a chargeback being issued.
Sometimes, neither the company nor the customer is to blame for chargebacks. Chargebacks may be caused by identity theft, fraud and cybercrime.
An incredible number of Americans suffer from identityft annually. The television show “Dateline” reports that the stolen identity, including all bank card and banking information, can sell for less than $5 on the internet.
Within minutes, merchants can be targeted by fraudsters around the world buying items using stolen charge card information. Chargebacks ensue. The merchants and the banks generate losses. And people are angry and frightened by losing their identity.
Merchants can dispute chargebacks. The merchant may even win the dispute. But, the bank sees a record of dissatisfaction on the part of consumers. And, the chargebacks still remain on the merchant’s processing statements and they are still considered chargebacks when account ratios are calculated.
The credit card banks insist that the processing account portfolio from the banks remain under 1%. If a merchant consistently exceeds the 1% threshold, the bank is fined. The longer the merchant stays within the threshold, the larger the fines become. In case a bank continuously has a high percentage of chargebacks from merchants, the bank risks losing being able to issue merchant accounts.
In case a business will continue to have chargebacks, fines are assessed from the bank. The bank, in turn, passes the fines on to the merchant who may or may struggle to pay. If chargebacks usually do not quickly fall below 1%, the bank will livzfq the merchant account. Consequently, the merchant may get out of business or declare bankruptcy. Leaving the bank financially accountable for the chargebacks.
Carefully watch your credit card merchant account processing statements monthly. Nip any chargeback problems in the bud, before they escalate and threaten your merchant processing account.
Should you be a High Risk Business, avail yourself in the expertise your payment processor has that will help you manage your account. There are excellent specialized tools available that can minimize chargeback risks while maximizing sales results.