A merchant is regarded as high risk business if the bank believes acceptance of a merchant will lead to a higher than usual risk of financial loss. High-risk businesses can still obtain merchant processing. But, many times, it takes expert advice to determine which acquiring bank is most effective to handle the specific needs of your high-risk business.
It is actually well worth-while to get a Dangerous Business to seek the expertise of the payment processing professional who understands how advisable to package the application form and ways to best present your small business towards the right banking officer.
Additionally, any business may wish to consider establishing accounts at several bank and often in more than one jurisdiction. Like any other business operation, redundancy of payment processing accounts protects your small business from unforeseen contingencies.
How come banks worry about high risk businesses? The answer is simple. Banks are worried about chargebacks.
A chargeback takes place when a consumer calls the issuing bank and disputes a charge. The customer provides 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 6 months on every purchase made employing a card.
Many reasons exist for chargebacks. Some are valid. For instance, a consumer may not have access to received merchandise or a merchant may refuse to refund money for an unhappy consumer. Sometimes a consumer calls the bank instead of calling the merchant resulting in a chargeback being issued.
Sometimes, neither the business nor the customer is to blame for chargebacks. Chargebacks may be due to identity theft, fraud and cybercrime.
Countless Americans are influenced by identityft every year. The television show “Dateline” reports that the stolen identity, including all charge card and banking information, can sell for as low as $5 on the internet.
Within a few minutes, merchants can be targeted by fraudsters around the world buying items using stolen bank card information. Chargebacks ensue. The merchants and also the banks generate losses. And individuals are angry and frightened by the loss of 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 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%. In case a merchant consistently exceeds the 1% threshold, the bank is fined. The more the merchant stays on 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 consistently have chargebacks, fines are assessed against the bank. The bank, subsequently, passes the fines 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 go out of business or declare bankruptcy. Leaving the bank financially accountable for the chargebacks.
Carefully watch your processing account processing statements monthly. Nip any chargeback problems in the bud, before they escalate and threaten your merchant processing account.
Should you be a very high Risk Business, avail yourself of the expertise your payment processor has to help you manage your account. You can find excellent specialized tools available that will minimize chargeback risks while maximizing sales results.