Most Common Reasons for Sudden High Risk Merchant Account Shut Down
Reasons for Sudden Closure of High-Risk Merchant Account
All kinds of businesses have their fair share of risks and amount of unpredictability. Avoiding certain types of hazards and risks may be worth the gamble. One scenario which is high-risk card processing is not as clear as it may appear to be. While the name may be somehow frightening, high-risk card processing can prove to be beneficial to your business. For many this may be hard to believe, but there are numerous benefits linked with high-risk cc processing. With that said, what exactly is high-risk cc processing ?
High-Risk Credit Card Processing
Before accepting any payment, a business should obtain a merchant account with a receiving bank. There are two categories of merchant accounts; a high-risk and a low-risk merchant account. When a business is perceived as risky, a high-risk processor will be required. Very few traditional processors agree to take high-risk clients and a majority of the high-risk processors function from overseas. All in all, here are some of the reasons why credit card processing in high-risk niches is advantageous to the business.
- Global Expansion
Many merchants whose main goal is to thrive in the global e-commerce normally seek the services of high-risk processors because they process multiple currencies, accept card, not present transactions and also can sell to clients who are not within the United States, Canada, Japan, Northern Europe and Australia. The amount of money that businesses may generate from e-commerce sells make high-risk accounts appealing.
- Limitless Earning Potential
Low-risk merchants have several limits imposed on them most of which are not desirable. A great example is that they cannot offer recurring payments and cannot sell any service or product that they wish to. Recurring payments may increase a business’s revenue greatly. Products, businesses, and services which credit card networks see as risky include pharmacies and drug stores, drug proprietors and drugs, cigar stores and betting services.
- Non-Threatening Chargebacks
Conventional merchant normally accounts assess a smaller chargeback fee than the high-risk credit card processors. Nonetheless, the long-term effects of low-risk chargeback management are usually very detrimental.
Reasons for Sudden Closure of High-Risk Merchant Account
- Exceeding the Chargeback Limit
Most debit and credit card providers normally set a chargeback level for businesses which accept or make use of their cards. MasterCard and Visa demand that merchants maintain their chargeback to one percent. If the trader exceeds the amount and volumes of their monthly charges or fails to meet the requirements stipulated by the merchant account provider, then they may withdraw their services. Thus to ensure compliance, then it is highly advisable to minimise the number of chargebacks.
Another reason why a high-risk merchant account could be closed is when the merchant processes transactions for another merchant or business which was not named in the initial merchant account application. Factoring is illegal and could result in the prosecution of the trader or possibility of criminal charges.
- Suspicious Merchant Activity
Apart from factoring, another reason why a high-risk merchant account could be closed is when the merchant conducts an abnormally high priced individual transaction. Conducting excessively high amounts of high-priced individual transactions will lead to problems since transaction levels are expected to remain in line with the totals which were submitted in the initial application. With that being said, a majority of the credit card providers will consider seasonal variations and thus, in turn, make allowances. Additionally, it also highly advisable for the merchants to inform the credit card provider in advance if they are planning to hold promotional events that may cause an increase in transactions.
If the merchant commits fraud, then the account provider is going to terminate the account. Good examples of fraudulent activities include making of fraudulent transactions, misuse of credit card information, overcharging of customers, non-delivery of merchandises and the use of misleading advertisement.
Steps to Take after Closure of a High-Risk Merchant Account
The closure of a merchant account is a serious setback for any business. However, this does not mean that it is the death of the business. Here is a breakdown of what to do after the closure of a merchant account and also how to avoid high-risk merchant account termination in the future.
- Ask why the Termination occurred-Merchants must not assume that they understand why the account was closed. It is very important to know the reason why the account was closed.
- Check if the Merchant was matched-A match list is a database which contains information about owners and businesses whose accounts was canceled. Check to see if your business was matched.
- Save the Statements-Merchants must have at the very minimum the last 6 months of processing statements.
- Look for a new Acquirer- Being placed in a Match list after a canceled merchant agreement is normally not impossible to overcome. Merchants should immediately start looking for a high-risk merchant.
- Be professional and honest-Most merchants are normally tempted to make their situations much better than it is. Making your situation more appealing to a prospective acquirer is a damaging tactic which will eventually backfire.
- Stay Professional-It may take a long time to underwrite a high-risk merchant account. Do not try and rush the process.
- Be Compliant-Acquirers are always going to scrutinise any new merchant account. However, they are going to take extra caution with a previously closed merchant account.