How to understand the costs of High Risk Payment Gateway

Selecting the appropriate payment gateway can create many challenges for those companies that are offering products or services in high risk areas. The most challenging part for some is determining what they are paying for and how much it's costing them; high risk payment gateway often have their own unique pricing models as compared to regular merchant accounts - understanding these different models can help with understanding how to avoid hidden fees, effectively manage cash flow, and protect your profit margins.

1. Setup Fees

In general, you will pay a setup fee for your account when using a high-risk payment gateway, and you should review that fee before selecting a provider. The set-up fee includes costs such as account configuration, underwriting, compliance checks, and technical integration. Some providers will advertise "no set-up fee," but may charge you fees ranging from hundreds of dollars to several thousand dollars, depending on your level of risk.

2. Monthly Fees

Most high risk merchant accounts come with a standard monthly fee as well. That fee covers account maintenance, reporting tools, customer service, and the fraud monitoring system. Typically, you will be paying more in monthly fees for a high risk payment gateway than you would for a standard payment gateway because the high risk payment gateway has a greater need for monitoring and risk management.

3. Fees Associated With Transactions

One of the biggest costs associated with a transaction is the associated fee. This is typically based on two parts: a percentage of the sale and then a charge for the actual processing of that sale. For example, you can expect to pay anywhere from 3% to 6% plus $0.30 per transaction based on several factors, including where your business is located, your chargeback history, and the volume of transactions that exceed the processor’s processing thresholds.

Higher rates indicate that the processor and bank take on greater risks when dealing with these types of businesses.

4. Chargeback Fee

In the high-risk industries of e-commerce, subscription services, travel, and digital goods, chargebacks happen frequently. When there is a dispute with a customer regarding a transaction, the gateway will charge a chargeback fee, which could vary from $20 to $100, depending on the processor used and/or the policies of the merchant account.

In addition, if you obtain excessive chargebacks, you could be assessed higher processing fees, and/or have your account terminated. Therefore, you must be proactive in monitoring and controlling your chargeback ratios.

5. Rolling Reserve

A rolling reserve is an amount of your daily or monthly volume that the processor withholds for a specified period of time (usually between 3 and 6 months) as a safeguard against any fraudulent transactions or possible future chargebacks.

For example, if your rolling reserve is 10%, then the processor is withholding 10% of your revenue for a temporary period of time. While this is not truly a fee, it directly impacts your cash flow. As such, it must be factored into your financial planning.

6. Cross-Border and Currency Conversion Fees

Cross-border transaction and currency conversion fees associated with doing business globally can add substantial expense to your transaction fees that can range anywhere from 1%-3% per transaction, depending on the gateway and type of payment method used.

7. Early Termination Fees

In some cases, paying early termination fees that may apply to a high risk payment gateways, since you are canceling before your original expected term has come to an end, has to be looked at closely, since the penalties for doing so can be significant.

Final Thoughts

Overall, understanding the full total cost structure associated with high risk payment gateway will require much more than simply looking at transaction rates; you must take into account all the other costs associated with your payment gateway, such as setup/installation fees, monthly charges, chargeback fees, rolling reserves, and contract terms. In order to come to a good conclusion on choosing Trinity Consultings high risk payment gateway that meets the criteria listed above, businesses should compare multiple providers and ask detailed questions if each provider's transparency concerning pricing.

If all components of cost are reviewed closely, then high-risk businesses will be able to come to a good decision relative to price, quality, and a provider that offers long term prospects for growth.