Credit card processing for high-risk merchants

In this day and age, accepting credit cards as a form of payment for your business is an absolute must. For the average retail business, it is as easy as calling a merchant bank and requesting a merchant account. However, some businesses are classified as “High Risk” by processing institutions and are much more difficult to get a merchant account for and are typically more expensive.

A high-risk merchant is any merchant that has very poor credit and/or owns a business that operates in an industry that is known for having higher than average chargebacks and a higher chance of transactions being fraudulent. A few good examples of businesses that would be considered “High Risk” are as follows.

• Casino and poker sites
• Adult Services
• Online pharmacies
• VoIP companies
• Travel agencies
• Subscription-based businesses

The reason that processing banks are hard on businesses that are considered high risk is simple. If a business fails to meet its obligation to provide its customers with a service or if a business goes bankrupt and a customer demands their funds be returned to them, then the merchant bank is obligated to refund the customer out of their own pocket. All of the risks associated with processing payments are absorbed by the bank itself, and the bank just does not want to deal with that.

So, what options does a high-risk business have?

A business owner always has the option of not acquiring a high-risk merchant account and, thus, not accepting credit cards as a form of payment. Unfortunately, accepting credit cards as a form of payment is a must in order for a business to flourish. If you do not have the ability to accept a credit card, a customer is likely to just go to one of your competitors.

A more feasible option is to choose a merchant account service provider specializing in working with high-risk businesses. These professionals offer a complete range of high-risk merchant services, including high-risk credit card direct processing and high-risk e-check processing solutions. With their assistance, you can accept credit card payments in as little time as possible with a stable, safe solution with fair rates and favorable payment terms.

How Does Credit Card Processing Work?

Setting up a merchant account is one of the wisest things you can do for the growth and expansion of your online business. After all, a merchant account is what makes it possible for you to process credit card payments on your website.

But how does the credit card processing system even work?

There is no reason why you should be familiar with the ins and outs of how the payment processing system works on your website, as your payment processor or acquirer will handle everything on your behalf. However, it is still a good idea for you to get to know the basics.

Understanding The Mechanism

Let's try to understand how the card processing system works with an example. Keep in mind that these steps are similar for both low risk and high risk merchant accounts.

1. A customer buys something worth $100 from your online store and pays with a credit card.
2. The $100 amount will first be transferred to the payment gateway, where payment will be authorized with a small deduction (say $0.5).
3. The ($99.5) amount will then be transferred to the appropriate processor and submitted to the card interchange after a further small deduction (e.g., $0.5).
4. After the transaction is cleared at the interchange, the $99 amount will be transferred to the issuing bank with a further deduction (another $0.5). This is where the issuing bank will verify the flow of funds to the customer's credit card.
5. If the issuing bank approves the transaction, the $98.5 then reaches the processor at the acquiring bank.
6. Once the payment is authorized by the acquiring bank, the bank deducts a small amount ($1) and the final amount of $97.5 gets deposited into the merchant's account.

(Note: In the case of high risk merchant accounts, such as an online poker merchant account, the fees are almost always higher than those of low risk merchant accounts.)

Today, Online payments are exclusively made electronically, especially with the extensive use of credit and debit cards. So, if you still do not have a credit card processing solution on your website, you are losing out on a ton of customers.

Why Should You Set Up An Offshore Merchant Account?

Establishing a merchant account offshore is not a complex task anymore. While many high-risk businesses choose to open a merchant account offshore, not all accounts are exclusively created for high-risk merchants.

Companies in different industries establish accounts because the payment online processing option makes good business sense. The primary goal of any business is to have the most efficient payment processing solutions, whether the solution includes a merchant account offshore, domestic processing, or any combination thereof.

Business Benefits of a Merchant Account Offshore

• An offshore Merchant account diversifies payment processing and decreases risk factors associated with payments., this account offers substantial protection to businesses against the uncertainties in the global business world.
• Interchange rates vary under different jurisdictions. Therefore, it may actually be more affordable to process certain transactions through this account as compared to a domestic account.
• For companies doing international business, the foreign exchange rate of the currency is a major concern. This account can help a company in saving money on foreign currency exchange rates.
• Multicurrency processing. All these accounts can process and settle transactions in several currencies. Multicurrency processing helps in increasing sales by giving customers the option to pay in local currency.
• An account may offer several other business expansion advantages. Many countries give incentives and rewards to companies that establish a corporate presence under their jurisdiction.
• Certain high-risk businesses (such as OTC bitcoin trading desks) find it easier to process payments with an offshore high-risk merchant account than domestic.
• Businesses in the online Casino, Poker and online pharmacies have issues be approved onshore when as offshore bank maybe more accepting.
• An offshore bank account also offers unlimited processing volumes as a standard feature. This is particularly helpful to expand businesses rapidly.

International e-commerce and Offshore Merchant Accounts

In these times of international e-commerce and online business an offshore merchant can be a game change for an online business. The world has indeed becoming a global marketplace. Any international company is making a mistake if it is still thinking in terms of only national borders. International payment processing is crucial for companies that have a global customer base.