How do you choose the Best High Risk Merchant Account without overpaying?

Selecting the best high risk merchant account can be overwhelming, to say the least. All of these providers are telling you they have the lowest rates and fastest approval! However, Trinity Consultings obtaining the approval is only half the battle; finding a merchant account that not only meets your needs but at the same time does not overcharge you with hidden fees or high costs can be very difficult for high-risk merchants. Fortunately, if you go about it in the right way, you can secure the right merchant account all while protecting your profits.

The following tips will help you make an educated, cost-effective decision.

1. Know Why Your Business Is High Risk

Understanding what defines your business as high risk before shopping around will help you narrow down which provider is best for you. Several industries, including dietary supplements, adult services, travel, subscription services, and online gaming, tend to have higher risk because their chargeback ratios are typically significantly higher than those of other industries and/or because of regulatory issues associated with them. Knowing where you fit within the classification as a high-risk merchant will allow you to make a fair assessment of whether your current provider is charging you a fair price or an exorbitant amount because they have marked up their pricing above the “industry norm”.

2. Understand the Full Fee Structure

Many businesses are unaware that they are paying too much for processing fees because they focus only on the discount rates (3.5% + $0.30 for example). In most cases a high risk merchant account includes the following fees:

• Set Up Fee

• Monthly Fees

• Discount Rate (% of Each Transaction)

• Transaction Fee

• Charge Back Fee

• Rolling Reserve Requirement

• Early Termination Fee

You should always request a complete fee breakdown in writing. If the provider cannot provide this in writing and outline all associated costs, this is an indication that they are not trustworthy. A good provider will give a detailed account of all costs and make it clear that they will be completely transparent, so you will not have any surprises when you receive your monthly processing statements.

3. Compare Interchange Plus Pricing vs. Tiered Pricing

Interchange plus pricing is generally more transparent and will typically be the least cost-effective way for you to process your transactions over time compared to tiered pricing, which will bundle each of the transactions into two groups, qualified and non-qualified, so you will not be able to accurately predict your total monthly cost.

If you want to avoid overpaying on your processing expenses, then you need to find out which pricing model and request sample statements so that you can estimate your total monthly processing expense.

4. Assessing the Need for Rolling Reserves

Rolling reserves (5%--10% of monthly volume for a period of 90--180 days) are typically required with high-risk accounts; however, the reserve percentage and length of time must accurately reflect your actual risk exposure.

If possible, negotiate. A stable sales history with low chargebacks may enable you to reduce your rolling reserves. Don’t just accept the highest rate presented to you.

5. Consider More Than Just the Lowest Rate

It’s easy to let cost guide your decision when choosing a payment processor; however, the truly “lowest” rates may have hidden costs and/or unreasonable contract terms. Instead of pursuing the cheapest option, focus on value while comparing providers’ offerings:

• Strong fraud prevention

• Chargeback management support

• Reliable customer service

• Multi-currency support, if applicable

• Quick funding

By choosing a processor with a slightly higher rate but better support, you could potentially save more money in the long run due to fewer chargebacks and downtime.

6. Review Your Contract & Exit Clauses

Many times, vendors will have high-risk businesses locked into long-term contracts that may have large early termination penalties. Before signing, check the following:

• Length of Contract

• Auto-renewal Clauses

• Early Termination Fees

• Reserve Release Conditions

If you’re flexible, it may give you protection as your business expands or as your risk level decreases.

7. Work With A High Risk Processing Specialist

Not every payment processor understands both high-risk customers and high-risk industries; therefore, you will have a greater chance of getting a fair price and receiving an approved application for your business working with a payment processor that specializes in high-risk processing than one that does not.

Additionally, because high-risk specialist processors typically have strong relationships with multiple acquiring banks, they can establish relationships that create the best match for your business rather than just a one-size-fits-all relationship.

This way, you will reduce your chances of being suddenly shut down, which can cost you much more than the extra processing fees that you might have paid.

8. Pay Attention to Chargebacks

Your processing costs are determined by how well you do with regard to chargebacks. To keep your chargeback ratio as low as possible:

• Have a clear refund policy

• Have good customer support

• Make use of tools that help prevent fraud

• Send detailed billing descriptors

Having a low chargeback ratio gives you increased bargaining power when you go back to your acquirer to discuss your fees.

Final Thought

Finding the best high risk merchant account without overpaying is all about understanding your options, comparing them, and negotiating. Don’t rush into any decisions—ask lots of questions and make sure that you fully understand all of the fees associated with your account while keeping in mind that you want to have an account with a high level of stability as well as an affordable one.

By taking the time to review all of the fine print before making a decision, not only are you choosing a payment processor, but you are also protecting your business’ revenue, reputation and growth over the long term.