However, don’t worry! If you are deemed high risk, it will be really difficult for you to find a payment processor to open your merchant account. Even if you do find one, the rates will not be reasonable. However, you don’t need to worry anymore. With these 8 tips, setting up a high-risk merchant account will become a piece of cake for you.
1. Find a High-Risk Specialized Merchant Account.
When you look for the best merchant account service providers, you’ll notice those common themes. The merchant account services providers with low rates and excellent service will not offer their services to high-risk businesses.
One of the main reasons they can offer such low rates is because they refuse to provide high-risk merchant accounts. They can keep their overhead low by not setting up a high-risk merchant account.
Even if one of these services approves your high-risk business, you can expect exorbitant fees and binding contracts. A payment processing service that focuses on high accounts will be able to provide you with not only more options but also lower costs.
2. Be Aware of the Cost.
Account fees vary greatly depending on the services you require. You can expect to pay between 2 and 5 percent per transaction. Unfortunately, even if you use a specialty service, you will inevitably have to pay higher prices than a regular business. It is because of your high-risk status.
Nobody will offer you the low rates and attractive deals that most processors advertise. Don’t overlook a potentially excellent service for your business simply because the price is significantly higher.
3. Make a List of Your Processing Needs.
The basic requirements for setting up a high-risk merchant account are the same as others. You must carefully consider what services and equipment your company requires. This will help you save money because you must pay higher fees and rates.
It isn’t easy to know exactly what you need and what you can live without. Some services may be prohibitively expensive. However, this will justify your increased profits that come from additional sales.
4. Don’t Lease your Equipment.
The high cost of Equipment can be a major problem when starting a new business. However, purchasing rather than leasing credit card processing equipment will save you money in the long run.
Most lease agreements require you to commit to a 48-month term with steep cancellation penalties. You must pay for your hardware until the contract expires, even if you decide not to use it after a year or two.
According to NY Biennial Statement Online most leasing can demand up to $100 per month for a machine. That machine’s original price would only be a few bucks more than its leasing cost. So it is better that you spend more upfront than to spend less than once.
Some merchant account providers will provide you with a free credit card terminal. However, it is only possible if you don’t have the funds to purchase your Equipment outright. But, keep in mind that there will be a yearly terminal renewal fee.
5. Get Complete Ecommerce Assistance
If you only intend to run a physical store, ecommerce support is completely unnecessary. On the other hand, if you only conduct business online, the right ecommerce solution will serve as the foundation of your business. However, before you can begin selling your products online, you’ll need to set up a secure yet user-friendly ecommerce payment gateway. This will make your customers’ online shopping experience more convenient.
6. Negotiate a Price that Meets your Needs.
Because Setting up a high-risk merchant account isn’t easy. Most high-risk processors will not provide you with any rates or fees upfront. You must first deal with several third-party organizations and services to offer high-risk payment processing solutions.
This means you’ll have to haggle over prices to get the best deal for your business. Following the advice above is just one step in ensuring you purchase only the Equipment and services you require.
Apart from that, you’ll be responsible for two basic costs: processing rates and account fees. Processing rates are the fees you pay per transaction, whereas account fees are the payments you make on a monthly or annual basis for your merchant account.
As a high-risk merchant, you’ll have to pay more for processing your account. You should, however, try to negotiate a lower rate for one or the other, depending on your company’s payment processing needs.
Negotiate higher processing rates in exchange for a lower account fee if your company has a low sales volume. This way, you can ensure that your company is set up for success from the start, as it is much more difficult to renegotiate later. However, if your company has increased sales, it will be the other way around.
7. Get a Month-To-Month Contract.
If you are setting up a high risk merchant account, then the most safest option will be getting a month-to-month contract. Especially if you’re a high-risk merchant. Unfortunately, getting a provider to agree to a month-to-month agreement is more difficult if your business is risky.
Another option is a standard three-year contract, but this usually comes with a hefty early termination fee. If your company has the misfortune of going out of business, these fees can be devastating.
Although a month-to-month contract is ideal, most high-risk merchant account providers are hesitant to offer one.
8. Find the Most Cost-Effective Balance.
Setting up a high-risk merchant account is ultimately a cost-benefit analysis. Consider how your business operates and what it requires. Once you do that, then devise a strategy. This will help you ensure you’re not paying a penny more than you have to.
So when you are setting up a high-risk merchant account, you should ask yourself questions. Would you be able to process online payments? What hardware would you need for processing transactions? How long will my business last? And would I be processing a large volume or small volume of transactions?
You’ll need to prioritize where you spend your money based on your answers to these questions. However, keep in mind that saving money in one area may mean paying more in another. Just make sure that whatever you’re paying more for will help you grow or protect your company.
For example, while a month-to-month contract may require a high monthly merchant account fee, the risk of cancellation fees may make it a worthwhile investment.
