Question 1

How much does a high risk payment processor charge?

Accepted Answer

Individual rates depend on the processor, but most high-risk merchants will pay 0.5% to 1% higher than low-risk businesses. The average high-risk processing rates range from 2% to 10% or more per transaction. Providers may also charge a $10 to $50 monthly fee for high-risk accounts, and rates could fluctuate depending on the perceived risk level.

Question 2

What are the disadvantages of a high-risk merchant account?

Accepted Answer

Downsides of using a high-risk merchant account include higher processing costs, required account holds or rolling reserves, and increased compliance and regulatory restrictions. Chargebacks and customer disputes may be more common in high-risk businesses, and the choices for providers will be limited.

Question 3

What makes a merchant high-risk?

Accepted Answer

The high-risk label can come from a number of factors, including high transaction volume, high average ticket size, or low credit score. You may also have a historically high chargeback ratio or high potential for credit card fraud. Limited business operating history could also be a factor.

Question 4

What is high-risk credit card processing?

Accepted Answer

High-risk credit card processing services are provided by specialized financial institutions that cater to merchants who operate in a risky industry, or who have a history of excessive chargebacks. High-risk credit card processing services cost more than standard services and may require merchants to establish account reserves.

Question 5

How much does a high-risk merchant account cost?

Accepted Answer

Fees for high-risk merchant accounts vary, but processing fees typically range from 2.5% to more than 5% of transaction volume and are usually up to 1 percentage points higher than processing fees associated with standard, low-risk merchant accounts. Additional costs include monthly fees and higher-than-standard chargeback fees.

Question 6

What is considered a high-risk transaction?

Accepted Answer

A transaction is deemed &acirc;high risk&acirc; when it carries an elevated risk of fraud or loss. For example, a transaction that has a high likelihood of turning into a chargeback may be considered high-risk. Typically, international transactions, high dollar volume purchases, cash advances, card-not-present transactions, and payments for certain goods or services (e.g. e-cigarettes, poker chips, adult products, credit repair services, etc.) are considered high risk.

Question 7

What is Level 3 credit card processing?

Accepted Answer

Level 3 credit card processing allows large companies that transact with other businesses or the government to save on credit card processing fees. To qualify for Level 3 processing, merchants must provide their payment processors with extra data, including invoice numbers, product codes, tax IDs, line-item breakdowns of goods and services provided, and transaction-specific data.

Question 8

What is the average merchant processing fee?

Accepted Answer

On average, merchant processing fees range between 1.5% to 3.5% of a transaction. Processing rates are usually structured as a percentage plus a flat rate, so an exact fee may be 2.9% of the transaction value plus $0.30 per transaction.

Author

Monica Eaton

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