Merchant Services Tips For High Risk Merchant Accounts: A Step-By-Step Guide
Whether you’re new in business or just switching from a regular merchant account to a high-risk merchant account and you’re looking at how you can get merchant account services for your venture. Here are some merchant services tip on what you’ll need to know first.
Creating a merchant account is in the dealer’s best interest no matter what type of business you are in. Customers do not always have cash with them so as a seller, you’ll have to know how to get a merchant account, as well as how to open high-risk merchant accounts.
Understanding these nuances of payment processing can help you make more informed business decisions, thus helping you succeed in your chosen venture.
If you’re curious as to how you can get merchant services for high risk accounts including high-risk merchant account rates, here’s a step-by-step guide to help you open merchant accounts and process and receive credit card payments like a pro.
What is a Merchant Account?
A merchant account is an account specifically dedicated to receiving funds from sales, as well as a source of funds for refunds or other disputes. It is an agreement between a merchant and an acquiring bank, which will allow the business owner to process and accept credit card payments.
The funds from your merchant account will be transferred to your business’ bank account, and you can manage your funds normally, just like how you do it on your regular accounts.
It is the first step that’s needed for a business to have a merchant account in order to accept online payments.
By signing the agreement with your chosen provider, you agree to abide by the operating regulations established by Visa, MasterCard, or any other card brand.
Acquiring a merchant account is a way for you to grow your business by reaching out to a greater number of customers. These are the majority of people who are willing to pay for their goods and services with a credit card, instead of cash.
What is a high-risk merchant account?
A high-risk merchant account is a merchant account given to a business that is deemed to be at a greater risk of fraud and chargebacks according to their credit history or the assessment of the bank or financial institution.
One of the most important merchant services tips for businesses include understanding:
- The type and nature of the business you are currently operating, or are planning to operate
- Where your business is located
- Personal financial history
Financial institutions can determine whether or not a business is high risk during the underwriting process of their merchant account application. They consider a lot of factors including those three mentioned above.
Almost every business needs to be able to accept credit and debit card payments, which means almost every business needs a merchant account. But, keep in mind that not all merchant accounts are created equally.
Now that you are fully aware of the nuts and bolts and the difference between the typical merchant account and a high risk merchant account, the only question left is how to open your own account, and where.
How to Create a Merchant Account
First and foremost, there are many things one has to consider before making a final decision about a merchant account provider.
One option is to go through your payment gateway provider to obtain your merchant account. This will save so from the hassles of managing one on your own.
And while the best rates and the most attractive conditions totally depend on the type of business, its size, turnover, processing history, and many more other details, there are important things you simply cannot afford to miss. Below are some important merchant services tips that should always be taken into account when applying.
The 5 Steps In Creating A Merchant Account:
STEP 1 – Understand what your business needs in a merchant account
Before you talk to any merchant account provider, it is important that you understand what your business needs from the merchant account. In other words, decide how your business will accept credit card and e-commerce payments. Your options are:
- A virtual terminal (a web application that allows a business to accept credit card transactions through internet connected computers)
- A Smart Terminal
- A Point of Sale (POS) terminal that reads cards at your store
- Accepting payments on your mobile phone or tablet
- Accepting payments online
- Recurring billing options
It will also be best for you to decide ahead before getting into any discussion with any merchant account provider, as to what brands of credit cards and debit cards you want your business to offer.
After finding the products and solutions you want for your business to have, it’s now time for you to go out and find the merchant account provider that can offer both the rate you want and can afford, as well as the products that you will be needing.
STEP 2 – Compare and find the perfect credit card brand you want to work with
This is the starting point of your journey to acquiring a merchant account. Begin with analyzing what credit card brands are of best interest to you. This answer depends on the demographics of your target audience.
You might only need Visa and MasterCard, but if your clients come from countries with their own unique credit card brands, then make sure that the bank you want to open an account with has these other card brands.
So far, Visa remains the top choice in more than 20 countries, leaving MasterCard second, and American Express as the third most popular card brand.
STEP 3 – Study different payment models
One of the most important merchant services tips you will receive concerns the merchant account provider's fees. UndersThere are several types of fees and two of the primary fee programs are:
- Flat rate – it provides a set percentage and a per transaction fee.
- Tiered rate - transactions are grouped into different transaction fees for qualified, mid-qualified, and unqualified transactions.
You can also take into account Interchange Plus, which is a type of fee consisting of a set percentage and a per transaction fee that varies with each transaction as set by the individual credit card brands from which processors will charge an additional percentage or per transaction fee on top of the interchange rate.
As a merchant, you might offer your clients various payment models, be it recurring billing or one-time payments. See whether the bank supports both of these payment models for your type of business. And if so, find out what rates the bank offers and choose the one with the most applicable rates for you.
STEP 4 – Compare fees
If the merchant account provider has a tiered system of fees, do some rough estimate to see how much of your expected sales volume will pay out at the highest fee tier.
It’s best to know up front about high fees than to get unexpected bad news after you sign the contract and receive your first statement.
Also, don’t be afraid to ask about additional charges. Watch out for high cancellation fees because some merchant account providers rely on cancellation fees to make the most of their profits. Some merchant account providers even charge a cancellation fee in addition to the monthly fees they will lose for the length of the contract, so watch out for that.
Here are a few examples of additional fees that merchant account providers often impose that you need to watch out for:
- annual fees
- batch fees
- cancellation fees
- monthly minimum fees
- statement fees
STEP 5 – Watch out for scams
Some merchant account providers employ shady sales techniques. For example, they may promise to approve any type of business or they offer incredibly low processing fees, but you should always double-check especially if you hear anything that sounds too good to be true.
Merchant Services Tips for All Businesses
Hopefully these merchant services tips, and specifically for high risk businesses, will help merchant's avoid any of the pitfalls. As with many other industries, there are good and bad payment processors that can make or break a business' future. Merchants with any questions are encouraged to speak with EU Paymentz for more information.