As much as we wish this weren’t the case, the credit card processing industry doesn’t treat all types of businesses equally. Processors evaluate businesses on how “risky” they are when deciding whether or not they will work with them and what processing rate they will receive. Being labeled “high-risk” in the credit card processing industry isn’t the end of the world, but it can mean higher processing rates or a little difficulty finding a processor to work with. Here’s how to tell if you’re a high risk for credit card processing.
1. How’s Your Credit?
Yes, we’re talking about YOUR credit, not that of your business. Since credit card processors take on significant risk when allowing a business to process with them, they understandably want to make sure that you’re not going to leave them high and dry – and that means taking a long hard look at your personal credit. If you’ve got a spotty record, there’s a chance you’ll be labeled high-risk.
2. What’s Your Average Ticket?
If your average ticket is very high (think companies that sell in bulk or high-end furniture stores), you might find processors taking a second look to see if you’re a high risk for credit card processing. Because each individual sale is so large, you’re ripe for chargebacks and other disputes that could leave you and the processor hundreds of dollars (or more) in the hole.
3. Do You Get a Lot of Chargebacks?
Speaking of chargebacks, if you get a lot of them you are a potentially high-risk merchant. Unfortunately, while there are some things you can do to reduce your risk of chargebacks it ultimately comes down to whether or not your customers dispute their purchases frequently. In addition, if your industry as a whole is chargeback-heavy you too may be labeled high-risk, even if you haven’t shown evidence of that in the past.
4. Are Your Products Legal?
This seems like an easy one to check off right away – and in most cases it is. However, we promise there are enterprising entrepreneurs out there who want to sell drug paraphernalia, adult content, and other questionable products and services. Credit card processors don’t like questionable – it gives them the willies.
5. How Do You Sell Your Products?
Do you use shady high-pressure sales tactics? Do you send spammy or misleading marketing emails? If so, credit card processors don’t want to work with you. Businesses in industries that frequently get labeled as scams often fall under this umbrella as well – multi-level marketing (MLM), anyone? Again, even if your particular business is on the up and up being part of a tainted industry can hurt you.
6. Are You Based in the US?
US-based credit card processors generally prefer to work with companies who are based in the United States as well. If you’re based overseas but sell your goods and services mostly to US customers, be prepared to be flagged. Fraud is the major concern here, followed closely by varying international banking practices. If your country has more relaxed financial regulations, that poses a major concern for credit card processors.
Help! I Think I’m High-Risk!
First of all, don’t panic. A high-risk designation doesn’t mean you won’t ever be able to process credit cards, just that you may have to work a little harder to find a processor. Second, give 360 Payments a call at 1-855-360-0360 or drop us a line on our website. We can help you determine if you’re really a high-risk merchant and help you navigate the process.
PS – Credit card decline codes got you down? We’re here to help!
PPS – Check out our list of the best business credit cards for 2018.