If you are new to the high risk e-commerce world, or if you are sick of the unpredictability and high fees associated with payment aggregators, then you are probably thinking about how you can more conveniently accept credit card payments on your e-commerce site. Credit cards are the dominant method of payment in the e-commerce universe, but it isn’t as simple as many people think. The very first step to being able to accept credit payments as a high risk business is to get a high risk merchant account.
For years, E-Commerce 4 IM has been helping enterprises large and small get the merchant accounts that they need. In this article, we’ll cover some of the tips for getting your first high risk merchant account that will allow you to start your journey to profitability.
What is a High Risk Merchant Account, Anyway?
A merchant account is a bank account that expressly settles credit and debit card charges. The system is complex, but here is a simple version of how it works: When your customer enters a credit card number, it passes through your gateway to a credit card processor. The processor acts as a mediator, ultimately connecting the customer’s credit card bank with your business’s bank. If the charge is approved, the processor facilitates the movement of money from the customer’s bank or credit card account to your checking account.
The problem is that there is an inherent element of risk involved with all approved credit card purchases. The bank guarantees that the customer will get the product they just purchased with their credit card; every credit card agreement has language that makes that fact very clear. What this means is if you don’t deliver, or if there is fraud involved, the merchant account provider can end up footing the bill. The element of risk is especially prevalent among high risk businesses. This means that a standard merchant account won’t work. You’ll need a high risk merchant account that specializes in managing these risks.
Applying for your first merchant account is best thought of as similar to applying for a loan; you want to put your best foot forward.
Here are Some Tips to Start on the Right Foot:
1. Know your personal credit history:
Reputation and credit is everything. If you have outstanding delinquencies or negative entries on your credit report, clear them up to the extent that you can. Document everything you do in writing—never rely on a conversation or verbal promises from a creditor. Clearing up tax debt is doubly important. Make sure you get your house in order as much as possible before you apply for your first merchant account.
2. Write an old-fashioned cover letter:
It helps to let the bank know that you mean business and that you understand what you are getting into. Giving the merchant account provider details of your product, your business plan, and how you plan on achieving success can go a long way toward helping your cause.
3. Know your business type:
The banks view some products with a fair amount of suspicion. There is a class of merchants called “high risk businesses” that deal in products that are on banks’ and credit card processors’ “prohibited list.” These are businesses that have a statistically higher rate of credit card chargebacks or that the bank feels stand a higher risk of bankruptcy. Nutra products, MLM, affiliate sales, and high-end coaching products are all considered high risk. Your best move here is to engage a high risk merchant services provider like E-Commerce 4 IM early in the process to help you get the high risk merchant account that you need.
4. Know your anticipated highest ticket and volume:
A prospective merchant bank will want to know how much volume (the amount of money) you expect to move through your merchant account each month, and what your highest ticket price will be (the highest amount you anticipate processing in a single transaction). Staying within your monthly volume cap is extremely important. If you exceed your cap, your bank’s fraud detection software will sound the alarm. This might result in your merchant account being shut down for a period of time. The same thing will happen if you try to push through some very high dollar value tickets. Either way, you’ll be out of business while you and your bank sort the issue out. You can find your volume cap in your merchant account agreement, so you ought to read it very carefully.
About E-Commerce 4 IM
E-Commerce 4 IM specializes in high risk merchant account services. We offer credit card processing and chargeback mitigation for businesses around the globe. Contact us through our contact page or give us a call at 1-800-570-1347.