Credit Card Processing Blog

When it comes to choosing a credit card processor, businesses are treated differently based on the perceived level of risk they present. Enter the high-risk merchant. Your business could be identified as high risk for the following reasons:

  • Excessive number of charge-backs
  • Poor credit of business owner
  • Being a new business
  • Having a previously closed merchant account

However, often businesses are deemed high risk based solely on the industry in which they operate. Here are some business categories that are generally deemed high-risk:

  • 1-800 chat sites
  • Airlines or airplane charters
  • All adult-oriented merchants
  • Cannabis or drug-related paraphernalia
  • Cigarettes, e-cigarettes, or vape shops
  • Credit protection, counseling, or debt repair services
  • Debt collection services
  • Discount health or medical care programs
  • Debt consolidation services
  • High average ticket sales
  • Multi-level marketing (MLM) sales tactics
  • Non-US citizens doing business in the United States
  • Offshore corporation establishment services
  • Replica handbags, watches, wallets, sunglasses, etc.
  • Self-defense, pepper spray, mace, etc.
  • Vitamin and supplement sales
  • VoIP services
  • Weapons of any kind

As a high-risk merchant, credit card processing comes with a unique set of challenges. You’ll want to make sure you have a credit card processor that is equipped to deal with your specific business needs.

While the perfect payment processor may take some time to find, here’s what you should be looking for if you’re a high risk merchant.

Knowledgeable, excellent customer service.

Just because you’re classified as a high-risk merchant doesn’t mean you should settle for a sub-par credit card processing company. In fact, it’s more important than ever that you find a company that has a strong track record for dealing fairly and equitably with their clients. They should provide outstanding customer support, reasonable and transparent pricing and easy to understand billing practices. They also shouldn’t require you to commit to lengthy contracts in order to sign on.

Charge-back mitigation programs.

As mentioned before, charge-backs are used to dispute a credit card purchase and get a refund for the card holder. A charge-back voids a credit card card purchase by withdrawing funds that were previously deposited into the merchant’s bank account and applying a credit to the consumer’s credit card. Instead of seeking a refund from the merchant, the consumer contacts the credit card company and requests a refund. If the claim is determined to be valid, the bank then forcibly removes the money from the merchant’s bank account.

If you’re a high-risk merchant — for example, a private jet company that’s subject to nature’s elements or company that relies on a free trial followed by an automated renewal — you’re going to have a higher number of charge-backs. While charge-backs are a fact of doing business, they still cost you money. That’s why you’ll want to look for a credit card processing company that offers a charge-back mitigation program. Usually this involves working with a partner organization that will help work with the consumer to mitigate and reduce the number of charge-backs you receive.

Experience dealing with merchants in your particular industry.

If you’re a high-risk merchant, the right payment processor will have a clear understanding of how your business and industry works. This could include anything from support with high-dollar transactions to knowledge of the pharmaceutical or cannabis industry. For example, if you’re a private chartered jet company, you’ll want to work with a company that understands that charge-backs are a common occurrence in your business and can work with customers in case flights are delayed or cancelled.

Look for companies that have specific programs designed to address the unique and specific needs of your business. You might even find payment processing companies that specifically work with your industry. Take for example the cannabis industry — over the past few years there’s been an explosion of payment processing companies that are dedicated to addressing the unique needs of this industry.

Scalable services and pricing to grow with your business and meet your needs along the way.

Your business isn’t static, and the services offered by your payment processing company shouldn’t be either. High-risk merchants are especially vulnerable to predatory processing companies that charge excessively high fees and require long contracts. You want a processor that’s going to help address the changing needs of your business and grow with you. This means choosing a processor that offers the services you need and has a strong ethical track record.

Chip readers are just another trendy add-on designed to make us upgrade our equipment and payment methods, right? Wrong.

When you’re a merchant it may seem like you’re constantly having to adapt to new technology — for better or worse. However, when it comes to chip readers, they’re actually a highly beneficial tool for your business. Chip cards in general are designed to actually make financial transactions safer and more secure, therefore saving you time and money in the long-run.

Here are a few things that you should know about chip readers, but might have been afraid to ask.

  1. What’s the difference between EMV and NFC?

The world of credit card processing is full of acronyms, which can get really confusing — especially if you’re a new merchant trying to learn the lay of the land. This question is a good place to start. EMV stands for Europay, MasterCard, and Visa. It’s the abbreviation used when discussing chip-enabled credit and debit cards. NFC stands for Near Field Communication, which refers to the technology that enables contactless payments, like using mobile wallets (such as Apple Pay) or cards with contactless technology built in.

While both offer valuable security benefits to customers and merchants alike, they’re essentially two separate kinds of technology. Some payment processing equipment is designed to accept both kinds of payments, but not all are. If you’d like to accept both EMV and NFC, check with your payment processing company to see what equipment you’ll need.

  1. What’s the deal with Chip and Pin processing?

Chip and Pin processing simply means that along with inserting the chip of their card, the customer is also required to enter their pin. It’s a step away from the traditional Chip and Signature model and provides an added layer of security to credit card transactions.

  1. How are chip cards really going to affect my business?

If you’re operating a business in 2018, you’re required to have chip enabled readers (if you aren’t, you soon will be) and for good reason. Chip cards provide an extra level of security that helps protect both the merchant and the consumer from fraudulent purchases and other data breaches.

Unlike magnetic strip cards, which have sensitive financial data stored on their strips which can be then accessed remotely to make fraudulent purchases, chip cards create unique transaction codes every time the card is used. This is a one-time use code and cannot be used again for other purchases. Long story short, chip cards are simply a safer, more secure payment option for your business.

  1. Am I legally required to invest in a chip-enabled card reader?

No, not yet. However, if you’re concerned about preventing credit card fraud and want to provide your customer with the most secure shopping experience possible, you’ll want to switch over to a chip enabled reader as soon as you can. Retailers generally bear the financial costs of fraudulent purchases, so if you’re hoping to protect your business financially, investing in a chip-enabled reader is a no brainer.

As a merchant, protecting your customer’s financial data should be a primary concern. If you become slack in this area, you risk compromising your customers’ safety and your reputation as a business. With mobile payments and credit cards becoming increasingly popular ways to pay for goods and services, criminals have come up with new and clever ways to commit fraud.

When it comes to handling your customers’ financial data, you can never be too safe. To protect your business and your customers’ well-being, here are a few things you can do to maximize financial security and reduce the likelihood of fraud.

  1. Carefully choose your employees.

Ensuring your customers’ financial data remains secure starts by making sure you have the right people on your team. While you might be tempted to hire anyone who seems qualified, it’s important that you dutifully screen potential employees before you hire them. Do a background check to make sure candidates don’t have a criminal history of fraud or other financial crimes. You want to be sure that your employees are trustworthy, so make sure you actually contact and speak to their previous employers and follow up with their references.

  1. Conduct proper training.

It doesn’t matter how trustworthy your employees are. If they’re not trained properly, your customers’ financial data is at risk. This not only means training your staff to properly execute financial transactions, but also ensuring that your computers are properly protected against potentially hazardous sites that include malware.

If necessary, create a policy that computers can only be used for business purposes or sites that are pre-approved (for example, stipulate that your employees can’t open attachments from your computers). Staying on top of these things and continually training your staff on new technologies as they emerge should help keep data secure and reduce the risk of fraud.

  1. Only use PCI-compliant software.

When it comes to handling your customers’ credit card information, only use PCI-compliant payment gateways that filter out fraudulent transactions using anti-fraud tools like AVS (Address Verification System). All of the software you use should be PCI-compliant and tested frequently to ensure customers’ financial data remains safe and secure. If you’re storing customers’ credit card information electronically, make sure that it’s properly encrypted. If their info is stored physically, make sure that it’s housed somewhere secure that isn’t easily accessible (for example, a locked filing cabinet or safe).

  1. Beef up your password requirements.

If your business involves an online component, ask customers to create a more complex password that involves multiple special characters. A weak password system puts your business at risk of fraud. If employees are required to use a password to access the system, make sure they change their password every 90 days to ensure security.

  1. Have a security breach plan in place.

Even if you’ve done everything necessary to secure your customer data, sometimes security breaches still happen. To make sure things are handled in a swift and secure manner, it helps to have an emergency plan in place for securing compromised systems. If something goes wrong, make sure your employees know exactly what to do and stay in constant touch with your customers. Remaining transparent and providing follow-up support to your customers will help ensure them that you’re committed to security.

Near Field Communication (NFC) otherwise known as “tap and pay,” is becoming an increasingly popular payment method — and for good reason. NFC allows customers to simply tap or wave their card over your terminal to make a payment. It’s also the technology behind mobile wallets, which allow users to make purchases directly from their smartphones.

Here are a few reasons why you should be excited about tap and pay.

  1. It’s ultra convenient.

No signatures. No pins. No messy receipts to deal with. If a customer is making a payment using their phone, they don’t even need to have their physical wallet because they can use their mobile one. What’s easier than paying with a tap of your smartphone screen? It’s simple and incredibly easy to use.

  1. Faster, easier transactions.

Unlike traditional payments that require a customer to swipe their card and enter a PIN number, with NFC, a customer can simply tap their card and pay, allowing you to service them quickly and reach the next customer faster. It doesn’t get much more convenient than this.

  1. Allows customers to go wallet-free.

Forgot your wallet? Left your credit card at home? As more customers adopt NFC fueled payment options like Apple Pay, Google Pay, and Samsung pay, these pesky problems will no longer be an issue. Customers will simply be able to pay for goods and services using the mobile wallet on their smartphone.

  1. More secure.

The first time you heard about tap and go payments, you probably thought to yourself, “how could this possibly be secure?” However, the truth is that tap and pay is actually more secure than using a physical credit card for several reasons. In the unfortunate situation where a mobile device is lost or stolen, all credit card information is password protected. Additionally, NFC-enabled payment cards are designed to be more secure than the magnetic strip of a regular credit card. Unlike a physical card where anyone can pick it up and see your credit card information, with tap and go, merchants have no physical access to customers’ credit card information.

  1. It’s versatile.

NFC is very versatile and covers more than just payments. This technology can be used for booking tickets, reserving movie seats, redeeming rewards, coupons and so much more — and this is just the start when it comes to creating a seamless customer experience. NFC has also become popular in academia because it the high level of encryption allows institutions to use it as a security system, by accurately ID-ing students entering and exiting the premises. It’s also used in the workplaces for security purposes and to allow employees to share information amongst themselves.

  1. Awesome customer experience.

Companies that adopt cutting-edge technology are often viewed as progressive and forward thinking. In other words, having NFC gives you major cool points. Customers are always looking for the most hassle-free way to access goods and services, and tap and pay provides just that by allowing people to pay for services with the tap of the wrist. By providing an easy way to do business, you’ll not only retain current customers you’ll also attract new ones.

As a business owner, you may have heard the term Merchant Cash Advances (MCA) thrown around and wondered whether you should take advantage of them.

For starters, Merchant Cash Advances allow merchants to get an advance on their future revenues. Essentially, you’re selling a portion of your future sales in order to get an advance on capital.

These kinds of cash advances work differently from traditional bank loans. In order to qualify for one, a merchant has to accept credit card payments and/or have other income streams that regularly fund the business. After applying, the credit card processing company will then determine risks based on a merchant’s credit card revenue. If it looks like a merchant will easily be able to pay back the advance in a reasonable time, they get approved for the MCA. The advance amount will then be deposited into their bank account.

Merchant cash advances are designed for merchants that may not be able to easily get a traditional business loan. However, with convenience comes a cost. The interest rates on Merchant Cash Advances are typically higher than a traditional business loan. Because of this, it’s important to understand all of the pros and cons, and how they may affect your business before you say yes to an MCA.

  1. The approval process is relatively simple.

Unlike a traditional business loan which typically requires an extensive approval process, your application and approval for a Merchant Cash Advance are based solely on your credit card revenue. Usually, the application process is one or two pages that require crucial information such as your business tax ID and social security number (among other things). Because approval is based on revenue, you will need to provide past payment history including bank statements and credit card transactions.

If your business regularly processes a high number of credit card transactions but has bad credit, an MCA can allow you to access capital quickly in a pinch.

  1. You can get approved quickly.

Perhaps you have an emergency (for example, a key piece of equipment needs to be replaced) or you have the opportunity to take advantage of an offer that will upgrade your entire business (for example, a great deal on new fixtures). Since the approval process for an MCA is done online, you can access funds much faster. Often, the money will be in your account in a day or two.

  1. There’s no interest.

With an MCA, there’s no interest and the amount you owe never changes.

How a merchant pays back the loan depends on the factor rate (the number that sets the total amount the business owner has to pay back for the MCA) and the retrieval rate (the fixed percentage taken out of credit card sales to pay back the advance).

The factor rates generally range between 1.12 and 1.5. For example, if the factor rate is 1:3 and an owner gets an advance of $50,000, this means they’ll have to pay back $65,000 — and so on. Retrieval rates vary between 5% and 15%. So, if the retrieval rate is 10% and the merchant brings in $2000 in credit card sales every day, $200 of that will have to go into paying back the MCA.

  1. It’s expensive.

If you need an influx of cash in a pinch, an MCA may be your best bet. However, that kind of convenience comes with a hefty price. If you do your research, you’ll find that as long as you make your payments on time, it may be much more affordable to get a traditional business loan.

  1. MCA’s aren’t regulated.

MCA’s aren’t loans, therefore they’re not regulated by standard lending and usury laws. This is why lenders can charge the exorbitant fees that they do. The general lack of regulation on MCAs leaves business owners open to the risk of taking an MCA deal with a predatory lender. Before you say yes to an MCA, make sure that you carefully review the terms and the reputation of the provider.

At the end of the day, you need to carefully consider what business goals an MCA will help you accomplish. Will it allow you to invest in an area of your business that will create even more revenue (for example, the purchasing updated equipment) or is it simply to cover overdue bills? When accepting an MCA you want to make sure that the funds are going to help you grow your business and not just provide a band-aid solution to pre-existing problems.