Low Risk

Low Risk

Low risk is a type of merchant account that falls under several categories: monthly income of less than $20,000, low or no chargeback ratio, and your average transaction is less than $500.

Oftentimes the industry itself can dictate what business falls under the umbrella of low risk. A hotel or restaurant is usually classified as a low risk since problems tend to be worked out before the credit card is charged, thereby eliminating the need for a chargeback.

Garages, salons, pet supplies, online stores, and office supplies tend to be a few of the other business categories that are fast-laned for the low risk category.

When a business applies for a merchant account with a credit card processing company they move through the process and are slotted into low risk, medium risk, or high risk categories.

These categories affect the rates the business will be offered. The bottom line, credit card processing is a business and the company wants to protect its profit margin.

As a result, they will scale the percentages. This allows them to charge low risk businesses less since they know they will not have to face the revenue loss from chargebacks.

A further aspect that can determine the category a business falls under that cannot be controlled by the company itself is the location. Global regions are categorized in much the same manner as the business itself.

The United States, Western Europe, Canada, Australia, and Japan are considered low risk countries due to the stability of the economies and fraud prevention laws.

Anywhere outside these regions and countries is considered to be high risk.

The benefits of a low risk merchant account are mostly seen in the money saved per transaction. In addition, there are some added benefits including a deal on equipment, ease of application, and easier access to all major credit cards.

One of the greatest benefits of a low risk merchant account is simply the consistency of the business’s revenue stream. Without disputes, it’s easier to budget out a bottom line.

The downside to a low risk merchant account can be the smaller revenue stream. However, not having to spend the time with chargebacks and reversal rebuttals may be worth it.

Low risk generally means a safer investment of both time and money for a fledgling business.