Receiving Credit and Debit Card Payments? You May Be a High Risk

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Debit cards and credit cards

Whether you operate an online business or you have a brick-and-mortar retail location, there is a good chance that credit and debit cards make up the majority of the payments your company receives. In 2014 alone, online retail is expected to grow by at least 13% compared with the number of purchases in 2013, and the average Visa card holder spends an estimated $1,725 each year. With the desire for easy payment solutions for consumers, however, comes the need for businesses to accept credit cards online and in stores. Not doing so can become a serious detriment to a business, which will lose the customers who do not have cash or checks on them.

For businesses making the transition from cash only to credit card acceptance, or for companies and start-ups just beginning to accept online transactions, it is necessary to find an outside payment processing or merchant services company that can complete these transactions. These payment processing companies are used by almost all businesses to handle credit and debit card and check transactions. However, a struggle can result from the need for this processing: some businesses are at high risk for fraud when it comes to accepting payments from credit and debit cards. These companies must use high risk merchant services in order to complete the transaction from a customer’s credit card to the business owner’s bank account.

How can a business owner tell if a high risk payment processor is required? The following criteria is often used to determine which merchants are at high risk for fraud or other issues and how much they are charged:

Business Type: Businesses across all industries that are unregistered with local agencies or those that operate in high risk online industries (e.g. online gaming or software) will usually have to choose high risk merchant card services. Telemarketing, international, and offshore businesses are also considered high risk industries. Most of all, large businesses with high volumes of transactions pose a specific risk for fraudulent payments and may require merchant services for credit and debit cards and even checks, and smaller businesses that can’t afford fraud screening tools will also need a high risk merchant.

Business History: Any businesses that have had fraudulent dealings or bankruptcy in the past or currently have bad credit are considered an exceptionally high risk. These companies will also typically have to pay more for credit card payment processing. However, all companies, regardless of history, will require background checks into a business owners criminal and business history in order to ensure that the processor is able to work with a particular high risk merchant.

Fees: Charges for these high risk accounts are typically higher than they are for low risk payment processing, but there are also many protections these payment processors have in place to prevent fraud and other issues. However, due to the increased risk for fraud, these payment processing companies can also provide added fraud protection and other services.

For any business, processing credit and debit cards and checks can come with a serious risk, and not having fraud protection can sometimes result in serious losses. Businesses should choose a payment processor that is able to handle these services and others to ensure fairness for all when it comes to these transactions.

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