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Published: March 18, 2019

5 Ways to know if your Business is considered High Risk

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Let’s face it! The ability of business to process credit transactions is critical to the overall success of that business.

As more and more customers continue to patronize your product or services, there will come a time when you will need to provide more flexible and reliable payment options for them.  One of the unavoidable payment options you will have to provide for your customers is the ability to make payment using credit or debit cards. The advent of the internet and rapid development in technology is changing the traditional way of doing business. More than ever, people are seeking better, flexible and simple ways to buy and pay for goods and services.

While as a small business you may thrive with using Payment Service Providers (PSP) like Payoneer, Paypal, etc., you will still need to upgrade to a full-service merchant account when your business grows to a certain size. Now, this is where it gets dicey for your business:

The High-Risk Tag No Business Wants

In a fair world, credit card processors will treat all businesses equally. Unfortunately, this is the real world, and they don’t!

Credit card companies are known to issue lower processing rates and generous contract terms ONLY to larger, high-volume businesses. No credit card processor will miss the opportunity to carefully investigate and judge your business to see whether you fall into the “forbidden fruit,” category tagged the high-risk companies/business! If you do, the consequence can be severe in the following ways:

  • Most processors would turn down your request and will not give you a merchant account if you are considered high risk.
  •    Some processors that choose to help will charge you significantly higher fees and rates than you would otherwise have to pay for credit card processing.

The unfortunate thing is that there exist many credit card processing companies that deliberately market their services to high-risk businesses and make them pay a premium. That’s right! These guys know you’re struggling to get approval for a merchant account. They also know that with the size of your business, credit card processing is vital as a payment gateway for your survival. So, they bring their services to you, only to rip you off with outrageously wicked high fees and rates, accompanied by unconscionable contract terms. Don’t let this happen to you! Agapay is a fair merchant service provider and gives you an absolutely fair price!

There are five ways you can tell if a business is considered high risk. Here they are:

5 Indications That Your Business Is A High-Risk Business

  1.    Risky industry

Some types of businesses are in most cases always considered high risk, owing to the nature of such businesses. For instance, if your business involves products with moral ambiguity like marketing drug paraphernalia or pornography distribution, governmentally monitored substances, online casinos and more; such businesses are typical examples of businesses considered high risk according to the industrial category. Now, we here at Agapay do not service these industries, but there are others (like CBD, travel, and e-commerce) that we do help!

  1.     High chargeback history  

A chargeback happens when a customer or client reverses a debit or credit charge. If your business has a history of high chargeback rates, it will put your business in the unenviable high-risk category. Unfortunately, some businesses under certain industries are more prone to high chargeback rates because of their nature of products or services. As for many other mainline businesses, they simply fail to keep track and correct challenges that cause chargeback. So, it comes back to haunt them later on when dealing with merchant account service providers and they are labeled high risk.

  1.    Poor or Bad credit rating

Credit card processing companies view merchant accounts as a form of credit. This makes sense if you understand the procedure surrounding payment processing. When a debit or credit card is swiped for payment, the payment is approved by the card issuer (MasterCard, Visa, etc.) and the service provider that runs the merchant account processes it. Now, here is the catch: if it happens there is a fraud or chargeback, the processor is the one that will pay for it. Usually, these expenses are passed on to the merchant but the time delay is not something they want to do.

  1.    Offshore/foreign business operations

If you are operating a business with its headquarters based in overseas but sells mainly to customers of other nations such as in the US, your business might be deemed a high-risk business.  The reasons are not just down to the issue of possible fraud, but also other stronger factors such as lax banking rules and regulations in your home nation.

  1.    Negative or Invalidated financial history

Most underwriters consider the financial profile, longevity, and profitability of business when evaluating all merchant accounts applications. Typically, startups or not-yet-grounded businesses have nothing to prove their solvency. Therefore, such businesses may be considered high risk and not get approval for credit card processing. Another major challenge for such businesses is limited assets. For instance, if your business is requesting to process transactions worth millions of dollars, but have just $10,000 in the bank, it’s almost certain your business will be labeled high risk!

Final thought

In the modern world of doing business, the ability to process credit transactions is indispensable. But, if your business is considered high risk by processing companies, then you will need to find one that can establish your payment quickly. However, be careful because there are “hawk-like” merchant account providers ready to pounce and feast on you for ‘daring’ to wear the unfortunate tag of the high-risk business category.  Agapay is not one of those predatory merchant processors. We treat you ethically and morally and here to help! Call us today!

AGAPAY - Transactions that give

Agapay was founded on the idea that payment processing should be ethical and give back to the community. In pricing, structure and service, we will always do our best to give the most value and maximize service.
Agapay is a Registered Partner/ISO of Elavon, Inc. Georgia [a wholly owned subsidiary of U.S. Bancorp, Minneapolis, MN]
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