What is High-Risk Credit Card Processing? | Understanding How it Works

Risks are a part of every transaction, but there is, unfortunately, a whole category of merchants whose transactions are all categorized under “High-Risk.”

Even more unfortunate, having the words “high-risk” attached to your business comes with quite a few disadvantages. Fortunately, however, with the right payment processing partner by your side, it should be perfectly possible for you to navigate the ever-challenging high-risk credit card processing ecosystem.

It’s just a matter of understanding how the industry works and finding that right partner:

High-Risk Credit Card Processing | Overview

When it comes to high-risk credit card processing, there are different pieces that come into play. These ‘players’ as we’ll refer to them for the rest of this article, are as follows:

Player 1: The Merchant

As the merchant, you’re probably the most concerned about where you factor into this metaphorical game board — or whether you can even play the game at all! And well, it all depends on whether your business falls into the category of “high-risk” or “low risk.” If you fall into the former category, then you’re definitely a player. But okay, so how can you tell?

The following is a list of criteria used when determining whether a business is a high-risk one:

  • Your industry is classified as a high-risk industry.
  • You have a persistent history of chargebacks that are worth more than 1% of all of your credit card transactions.
  • Your country of operation is considered high risk.
  • You have a poor credit history (because of missed bills or lack of credit processing history).

As a “High-Risk” merchant, you’ll need a merchant account that will allow you to perform high-risk credit card processing — this is where the second player comes in.

Player 2: The Partner OR the Payment Processor

The next player in the world of high-risk credit card processing is the payment processors. Which, as the merchant, is your “partner” in crime in all of this — or at least, they should be.

Payment processors are third-party service providers that allow merchants like you to process credit card transactions easily.

They cater to both low-risk and high-risk merchants. Although, for the latter, you might find more difficulties when it comes to getting approved for a merchant account. That’s not even considering the fact that high-risk credit card processing, as a rule, will cost more — that means higher setup, monthly, annual, and, even, termination fees.

How Does High-Risk Credit Card Processing Work?

In practice, credit card processing works pretty much the same whether you’re dealing with low-risk or high-risk transactions. It’s just that the latter involves extra security.

Although, it should be noted that, when you take online credit card processing into account (which, by nature, is already much more vulnerable to chargebacks and fraud than regular in-store credit card processing), there’s an added level of complexity there.

Overall, however, the pros and cons of high-risk credit card processing are as follows:

Pros of High-Risk Credit Card Processing

  • Advanced Security: To accommodate the higher risk of fraudulent activity, high-risk merchant accounts require added security, which doubles as a way of enhancing overall customer satisfaction and boosting your brand reputation.
  • Global Coverage: With a high-risk merchant account, you can accept transactions in a wide variety of currencies — opening up avenues for massive global growth.
  • Increased Profit: With the added protection and coverage, you can boost your scaling efforts and celebrate increased profits.

Cons of High-Risk Credit Card Processing

  • Higher Transaction Costs: As mentioned, a high-risk merchant will have to deal with higher rates. You’ll also have to keep in mind that extra costs just come naturally to high-risk credit card processing as a result of fraud risk.
  • Reserves: As a high-risk merchant, the bank (or your payment processor) may require that you open up a reserve account — which will be used to cover the losses that come from future chargebacks.
  • Poor Customer Conversion: Nowadays, consumers have come to expect more from merchants when it comes to customer experience. With the limits imposed on high-risk merchants, providing the experience that they want can be very difficult to achieve.

Choosing a High-Risk Credit Card Processor | Platinum Payment Systems

There are many different factors that you need to account for when choosing a high-risk credit card processor for your business. But what is perhaps most important, is finding one that is willing to be your partner. Because you’ll need their support.

You’ll need someone on your side that has the experience and know-how that is needed to balance out the aforementioned pros and cons.

And, fortunately for you, there are plenty of payment processors out there that are willing to partner up with high-risk merchants.For example, if you choose Platinum Payment Systems as your partner—which is a merchant processor that has years of experience working with high-risk and high-volume merchants—you can be certain that you are getting the support that you need in order to process your high-risk credit card transactions smoothly and securely.

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