Credit card processing fees are somewhat complicated, extensive, and can get a bit overwhelming especially for high risk businesses. However, you still need to pay them in order to process credit cards through your business. Instead of paying these fees blindly, you can make an effort to understand them, and learn how to get the best fees for high-risk merchant services.
How Credit Card Processing Fees Work for High Risk Merchants
The credit card processing fees you pay will depend on the kind of pricing model that your merchant provider uses. There are generally 4 factors that affect the fees you pay when you accept a credit card payment:
Interchange Rate
The credit card issuers such as MasterCard, Visa, Discover, or American Express usually charge this amount per transaction for processing credit cards. The rate generally varies based on the type of credit card. For instance, a corporate card and a rewards card will have a different interchange rate. These rates are usually non-negotiable because the interchange rates are what the merchant account providers will actually pay to the card issuers.
Merchant Account Provider Fee
You need a merchant account to connect to the credit card networks in order to process credit card payments. High-risk merchant account providers typically make their money by charging an amount along with the interchange rate. The fees are usually negotiable to a certain extent, and are mostly based on your volume of sales and your type of business. As a high-risk business, you’ll generally pay a significantly higher rate than low-risk businesses.
Card Processing Method
The fees charged by the merchant account provider will generally be based on how the card is processed. For example, in a transaction where the customer swipes their own card, the amount of fees will be lowest since they have the lowest risk of fraud. Keyed-in and online transactions typically have higher fees since they have a higher risk of fraud.
Monthly and Setup Fees
Some high-risk merchant account providers will also charge an ongoing monthly fee and a setup fee to cover things like PCI/ Security compliance and support services. Some will even come with account cancellation fees, making it expensive for you to switch providers. Others will have no account, setup, or cancellation fees altogether, making them a great option for small businesses.
Due to the fact that the interchange rate is non-negotiable, the fees you end up paying will generally come down to the merchant account provider you choose.
How To Choose a High-Risk Merchant Account Provider
- Find One Who Specializes in your Type of Business
Many industries are usually regarded as high risk, including pharmaceuticals, weight loss, tobacco, health, telemarketing merchants, and automotive brokers. Be sure to look for the best merchant services company that specializes with your kind of business, or at least one with a good number of businesses in your industry in their portfolio.
- Understand their charges
When you create a merchant account, it will definitely cost you some money. Some of the high-risk merchant providers will charge significantly less than others, but you’re likely to pay up to 5% for each card transaction. It’s therefore wise to check and analyze the fees associated with using the merchant account. If you find that the charges are not reasonable, check out another option.
- Ensure there as many types of payments as possible
Setting up a merchant account is not all about accepting card payments. If you want to maximize your sales, plastics are simply not enough. A good provider should be able to process your customer’s payments from a variety of other methods.
- Excellent customer support
It might be easy to find high-risk merchant provider who have friendly prices and many services. But if they have a questionable customer service, all these features won’t matter. As such, when applying for a merchant account, ensure that the company has an outstanding customer support. To get a good feel of how they handle their clients, you can call them and ask a few questions. In case the provider is unwilling to answer your questions, becomes impatient of is incapable of providing ample help, don’t hesitate moving on to the next company.
- Wealth of tools to help secure your revenue
Ensure that the company helps you to manage fraud and chargebacks, and at the same time takes care of the payment information of your customers in a way that allows you to generate customer profiles.
Most providers usually offer their clients a demo, which you can schedule for to assess their services. Be sure to take advantage of such features and determine whether the company is right for you or not.
Negotiating for Better Credit Card Processing Fees
Once you’ve chosen and registered with a provider, you can now negotiate your processing fees. If you handle a large volume of credit card transactions, you can ask for a lower per-transaction fee, a lower fixed percentage, or both.
If you have a high-value average per sale, your focus should be on reducing the fixed percentage, since this has a huge impact on your bottom line. For instance, the difference between a 2% and 3% rate on a single purchase of high value, such as a $2,000 jewelry is $10 per sale, which is quite large.
On the other hand, if you make huge volumes of low-priced sales, you’ll be better off with a lower per-transaction fee. For instance, a 2% of a $5 transaction will only be around 10¢. If yin a day you make 100 such transactions, the 25¢ fee per transaction will add up to $25.
To ensure you’re getting the best deal from your provider, it’s important to compare your merchant statement with the fees charged by other processors. If there are any possible savings, they will stand out when the fees are being compared side by side.
You can always ask your provider to determine and explain your current effective rate. This will let you see exactly what you’re paying for, and why. In case the rate seems high, it might be time to shop around for another provider or renegotiate with your current provider for lower rates. You may be surprised how much savings you can achieve by regularly assessing your rates and shopping around.
