A merchant is recognized as dangerous business if the bank believes acceptance of a merchant will lead to a higher than usual chance of financial loss. High-risk businesses can still obtain merchant processing. But, many times, it takes expert advice to determine which acquiring bank is best suited to handle the specific needs of your dangerous business.
It is well worth-while for a High Risk Business to seek the expertise of a payment processing professional who understands how advisable to package the applying and the way to best present your small business for the right banking officer.
Additionally, any business will want 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.
Why do banks concern yourself with 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 has the right to dispute a charge approximately 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 using a card.
Many reasons exist for chargebacks. Some are valid. For instance, a consumer may not have received merchandise or perhaps a merchant may refuse to refund money for an unhappy consumer. Sometimes a consumer calls the bank as opposed to calling the merchant resulting in a chargeback being issued.
Sometimes, neither the business nor the consumer is responsible for chargebacks. Chargebacks may be due to id theft, fraud and cybercrime.
Millions of Americans are affected by identityft each year. The television show “Dateline” reports that a stolen identity, including all credit card and banking information, can sell for less than $5 on the internet.
Within minutes, merchants can be targeted by fraudsters all over the world buying items using stolen charge card information. Chargebacks ensue. The merchants as well as the banks generate losses. And people 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 companies insist that this merchant 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 includes a high amount of chargebacks from merchants, the bank risks losing being able to issue merchant accounts.
In case a business consistently have chargebacks, fines are assessed up against the bank. The bank, consequently, passes the fines onto the merchant who may or may be unable to pay. If chargebacks tend not to quickly fall below 1%, the bank will livzfq the credit card merchant account. As a result, the merchant may get out of business or declare bankruptcy. Leaving the bank financially responsible for the chargebacks.
Carefully watch your processing account processing statements every month. Nip any chargeback problems inside the bud, before they escalate and threaten your merchant processing account.
In case you are a higher Risk Business, avail yourself of the expertise your payment processor has to assist you manage your bank account. There are excellent specialized tools available that will minimize chargeback risks while maximizing sales results.