Monthly High-Risk Fee

High Risk Fees

You want to open a merchant account to process credit cards for your customer payments, but find out that your company may be considered ‘high risk.’

If your business has high average value tickets, deals in an industry that is subject to fraud, or has a high frequency of chargebacks, you are likely to need a high risk merchant account.

Compare High Risk Fees and Requirements

It is important to have a good understanding of what to expect when setting up a new merchant account. Every processor will differ but here are a few to ask your processing professional about:

• Chargeback Fees - As previously mentioned, high risk companies tend to have more chargebacks and thus processors may impose a higher chargeback fee for those companies.
• Transaction Fees - To mitigate their risk, processors may charge a higher percentage per transaction. These fees can add up quickly over time so a small difference in percent can have a great impact.
• Monthly High Risk Fees - Processors may charge a flat fee every month to high risk merchants in order to control their risk. This is usually a standalone recurring fee.
• Cash Reserve Requirements - Some payment processors may go as far as requiring the merchant to allow the processor to hold on to some cash as a reserve. Again, this is to protect the processor in the case of chargebacks or if the merchant runs into financial issues.

In rare cases, payment processors may charge an application or approval fee to high risk merchants.

These are rare and we encourage you to do your due diligence on the other requirements of the account before submitting an application to these providers.

Getting Started

Once you are aware that your business may fall into this category, it is important to compare payment processors. Each processor will have different standards and requirements for clients.

The application process may vastly differ from processor to processor. But because you have a high risk business, you should expect to pay high risk fees.

Before you even begin searching for a processor, review your company financials to be sure you are in a positive cash flow and have about 25% or more of your monthly sales volume in capital reserves.

This will show a prospective processor that you are a stable company with cash on hand.

Gather Your Documents

When applying, you want to have clear records to share with the processor. This may include showing 3 to 6 months of bank statements. In some cases, tax returns may be requested. This will help a processor see where money is coming from and where it is going.

Assess Your Current Sales Patterns

You can’t change your industry, but you can control certain factors that make you a higher risk to payment processors. If you are already processing cards, review your sales to chargebacks ratio. If you have many chargebacks, is there a reasonable explanation and can you improve the ratio?

Having fewer chargebacks will make you less of a risk to payment processors.

Also, are your average ticket values high or low? High average ticket values are considered riskier. If you sell bundles of products, breaking them up can lead to smaller transactions that appear more favorable to credit card processors.

Making a Decision

Many factors go into deciding who your payment processor will be and need to be weighed according to your business needs and goals.

Sometimes the importance of having help on the line is overlooked until it stops your business in its tracks. Choose a processor that will prioritize your business in an emergency.