A merchant is regarded as dangerous business if the bank believes acceptance of a merchant will lead to a higher than usual risk of financial loss. High risk businesses can still obtain merchant processing. But, many times, it takes expert advice to determine which acquiring bank is most effective to handle the specific needs of your dangerous business.
It really is well worth-while for a Dangerous Business to seek the expertise of the payment processing professional who understands how better to package the application and how to best present your small business for the right banking officer.
Furthermore, any organization may wish to consider establishing accounts at more than one bank and frequently in multiple jurisdiction. Like every other business operation, redundancy of payment processing accounts protects your business from unforeseen contingencies.
Why do 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 buyer provides the right to dispute a charge as much as 180 days after buying a service or product. Therefore, the bank is ultimately responsible for contingent liabilities of half a year on every purchase made using a card.
There are many reasons for chargebacks. Some are valid. For example, a consumer may not have received merchandise or even a merchant may refuse to refund money with an unhappy consumer. Sometimes a consumer calls the bank rather than calling the merchant resulting in a chargeback being issued.
Sometimes, neither the organization nor the buyer is responsible for chargebacks. Chargebacks may be brought on by id theft, fraud and cybercrime.
Countless Americans are influenced by identityft annually. The television show “Dateline” reports which a stolen identity, including all charge card and banking information, can sell for less than $5 on the internet.
Within minutes, merchants can be targeted by fraudsters around the globe buying items using stolen bank card information. Chargebacks ensue. The merchants as well as the banks lose cash. And individuals are angry and frightened by the losing of their identity.
Merchants can dispute chargebacks. The merchant may even win the dispute. But, the bank sees a record of dissatisfaction on the part of consumers. And, the chargebacks still remain on the merchant’s processing statements and therefore are still considered chargebacks when account ratios are calculated.
The credit card companies insist that the merchant account portfolio of the banks remain under 1%. In case a merchant consistently exceeds the 1% threshold, the bank is fined. The more the merchant stays on the threshold, the higher the fines become. In case a bank continuously features a high percentage of chargebacks from merchants, the bank risks losing its capability to issue merchant accounts.
If a business consistently have chargebacks, fines are assessed against the bank. The bank, consequently, passes the fines to 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 credit card merchant account. Because of this, the merchant may get out of business or declare bankruptcy. Leaving the bank financially in charge of the chargebacks.
Carefully watch your processing account processing statements every month. Nip any chargeback problems within the bud, before they escalate and threaten your merchant processing account.
Should you be a High Risk Business, avail yourself in the expertise your payment processor has to help you manage your bank account. You can find excellent specialized tools available which will minimize chargeback risks while maximizing sales results.