High-Risk Credit Card Processing:
If you own a business, an e-commerce store, or a brick-and-mortar retail location, chances are you accept credit cards as payment. But do you know the different risks that come with accepting credit card payments? Even if your business is established and secure enough to accept credit card payments, there might be certain circumstances under which it makes sense to refuse the card instead. What we know as credit card processing today stems from a bygone era when banks were forced to issue their customers credit cards so that they could make purchases without having to go to every shop individually in order to pay for things. These days, most consumers have credit cards because they’re financially stable and don’t just use them for impulse purchases. As such, thanks to the rise in e-commerce and online retailers over the past few years, there’s been a boom in demand for merchants that accept credit card payments. And if your business meets certain criteria, accepting credit card payments can be a lucrative alternative payment processing solution for your company.
What is Credit Card Processing?
Credit card processing refers to the online and automated handling of credit card transactions, which includes all the steps that a merchant’s system must take to receive, verify, process, store, and ultimately transmit credit card transactions to a bank. Credit card transactions vary from card to card, and typically are processed at a bank or credit card processing company using an automated system. There are two types of credit card transactions: A one-time transaction is where a cardholder writes a single check for the full amount of the purchase, and a continuing transaction is one where the cardholder pays a monthly bill (such as a cell phone bill) that charges the card every month.
What’s the difference between high-risk and low-risk credit card processing?
High-risk credit card processing involves accepting credit card payments that could result in higher fees. The fees are usually charged as a percentage of the amount charged to the card, which is known as the merchant’s percentage fee. If a cardholder fails to pay his or her credit card bill, they usually have 180 days to pay it off. If they don’t, the credit card company can charge fees to the merchant, who has to pay the fees. Some high-risk credit cards are Discover Card, American Express, and Diner’s Club.
Reaching for the Rebook Button: Which Credit Cards to Refuse
Reach for the rebook button! It’s one thing to accept a credit card payment that’s less than the amount you owe on your credit card. It’s another thing entirely to accept a credit card payment that’s significantly greater than the amount you owe. In other words, if you have a $10,000 credit card debt, you don’t want someone to pay you with a $30,000 credit card bill. Rebook the customer. Credit card companies have a 3% charge. It’s up to you if you want to take it or not. Be sure to get their contact information in case you decide to rebook the payment.
Accepting High-Risk Credit Card Payments
If you accept high-risk credit card payments, you’re at a much higher risk of incurring significant credit card processing fees. Besides, you may also find that high-risk credit card customers don’t pay their bills on time and as such, you may end up collecting nothing from them. Some high-risk credit cards are Discover Card, American Express, and Diner’s Club.
Reaching for the Rebook Button: Which Credit Cards to Accept
If you accept high-risk credit card payments, you have the option of requiring your customers to put up collateral with a credit restoration agency, like Encore Capital Group. This can be done by sending your customers to a credit restoration company, like Encore, which will negotiate with the customer’s creditor and try to get the full amount owed back. Some high-risk credit cards are Discover Card, American Express, and Diner’s Club.
Accepting Low-Risk Credit Card Payments
If you accept low-risk credit card payments, there’s a chance that a customer will go bankrupt and not be able to pay you back. In such a scenario, you can use the customer’s estate in court to get your money back. Some low-risk credit cards are Visa, MasterCard, and American Express.
The Benefits of Low-Risk Processing
Accepting low-risk credit card payments presents a number of benefits, including the following: – No risk of incurring high fees. The merchant’s percentage, assessed by Visa and MasterCard, is usually 2.9%, which is almost half of what a high-risk merchant would have to pay. – No risk of collecting nothing from your customers. The terms and conditions of a low-risk credit card contract typically state that if the customer goes bankrupt, the credit card company is not liable to pay you anything, even if the customer doesn’t pay the bill. – No risk of losing your customers to hackers. The most common high-risk credit card breach is when a hacker breaches a merchant’s computer system, steals the cardholder’s credit card information, and then uses it to make purchases online or at the compromised merchant’s physical store. A low-risk credit card system is not at risk of getting hacked.
Final Words
It’s important to note that accepting credit card payments is not for every business. It’s best to consider accepting these payments when you’re established, secure enough to handle the risks involved, have a large chunk of your payment from credit cards, and when you can afford to absorb the occasional credit card payment that doesn’t fully pay off the amount due.