A merchant is considered dangerous business if the bank believes acceptance of a merchant will lead to a greater than usual risk of financial loss. High-risk businesses can still obtain merchant processing. But, many times, it takes expert advice to find out which acquiring bank is most effective to handle the specific needs of your high risk business.
It is well worth-while for a High Risk Business to seek the expertise of any payment processing professional who understands how best to package the applying and ways to best present your small business towards the right banking officer.
Additionally, any company would want to consider establishing accounts at several bank and quite often in more than one jurisdiction. Like some other business operation, redundancy of payment processing accounts protects your company from unforeseen contingencies.
How come banks worry about high risk businesses? The answer is easy. Banks are worried about chargebacks.
A chargeback occurs when a consumer calls the issuing bank and disputes a charge. The consumer provides the right to dispute a charge as much as 180 days after buying a service or product. Therefore, the bank is ultimately in charge of contingent liabilities of 6 months on every purchase made using a card.
Many reasons exist for for chargebacks. Some are valid. For instance, a consumer may not have access to received merchandise or even a merchant may refuse to refund money to an unhappy consumer. Sometimes a consumer calls the bank as opposed to calling the merchant resulting in a chargeback being issued.
Sometimes, neither the company nor the consumer is responsible for chargebacks. Chargebacks may be caused by identity fraud, fraud and cybercrime.
Countless Americans are influenced by identityft annually. The television show “Dateline” reports that the stolen identity, including all charge card and banking information, can sell for as low as $5 on the internet.
In a few minutes, merchants can be targeted by fraudsters around the world buying items using stolen bank card information. Chargebacks ensue. The merchants and the banks generate losses. And individuals 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 an archive of dissatisfaction on the part of consumers. And, the chargebacks still remain on the merchant’s processing statements and they are still considered chargebacks when account ratios are calculated.
The credit card banks insist that the credit card merchant account portfolio in the banks remain under 1%. When a merchant consistently exceeds the 1% threshold, the bank is fined. The longer the merchant stays over the threshold, the larger the fines become. In case a bank continuously includes a high portion of chargebacks from merchants, the bank risks losing its capability to issue merchant accounts.
In case a business will continue to have chargebacks, fines are assessed against the bank. The bank, in turn, passes the fines onto the merchant who may or may not be able to pay. If chargebacks usually do not quickly fall below 1%, the bank will livzfq the processing account. Because of this, the merchant may fall out of business or declare bankruptcy. Leaving the bank financially accountable for the chargebacks.
Carefully watch your credit card merchant account processing statements monthly. Nip any chargeback problems within the bud, before they escalate and threaten your merchant processing account.
If you are a very high Risk Business, avail yourself of the expertise your payment processor has to assist you manage your bank account. You can find excellent specialized tools available that can minimize chargeback risks while maximizing sales results.