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[H345]High Risk Merchant Account Processing

by Mj Hunt, Mj

Are you developing an adult oriented business? Before you move forward, you should be aware of some of the difficulties adult businesses face when trying to set up a merchant account. Why are such businesses often considered high risk?
First, what exactly defines an "adult" business? Many adult-oriented companies�"such as stores that sell adult toys, erotic novelties, sexy lingerie and related adult apparel�"are deemed to be normal-risk businesses and have little trouble acquiring a merchant account. The problems start occuring with businesses that provide hard-core pornography for sale or download, whether full-length movies, shorter videos, or sexually explicit or nude photographs.
Most people know that the pornography industry, whether professional or amateur, is insanely lucrative. But it carries attendant risks and dangers other types of businesses don't normally have to deal with.
For one, pornography has for decades faced the taint of criminality, in part because of obscenity laws and other means used to ban it or reduce its influence. Even though it is a multi-billion dollar industry in the United States, many people consider it immoral and socially damaging. As well, adult sites have to deal with the complications of barring underage people from viewing its content, which can carry further legal risks.
Perhaps because of its shadowy history and the legal and ethical complications surrounding pornography, the adult market can attract scam artists in disproportionate numbers compared to other types of business. Consumers may be more likely to view an adult site as illegitimate or fraudulent, simply because of what it sells. Adult sites have higher levels of chargebacks than other businesses, as well. To use a common example, if a wife discovers her husband's adult website purchases on credit card transaction slips, he could possibly try to claim his card was stolen and attempt chargebacks.
Because of the unique problems adult businesses face and the higher rate of chargebacks, an adult business will likely be considered to require a high risk merchant account. A high risk account, though generally similar to a normal merchant account, will charge much higher fees, may have a large start-up fee, and may demand a quantity of the merchant's funds be held in the event of excessive chargebacks and fraud.
Many so-called adult businesses that sell products like clothes and toys and do not provide pornography will be treated like regular businesses, but some providers will still consider them high risk. If you are operating such an adult business, search around for a provider who will not classify you as high risk. If you are operating a business that sells pornography, on the other hand, you are probably out of luck and will have to acquire a high risk merchant account.

In the world of online sales, there are a lot of things written on the page but are left unread between the lines. In other words, you go about selling your products and services but there are lots of things high risk merchant account providers don't tell you. Not because they could not or would not, but because they would not discuss the issues with you until you have experienced them. A good example is going through possible freezing of your merchant account.

If, as a high risk merchant, you have not exerted an effort to make a research concerning frozen accounts, then you're in BIG trouble. I'll keep it short. Once your merchant account is frozen, your present and future business is put under horrible risk. First, because you will lose the ability to process credit cards online. Second, you will be denied merchant account if you applied for another one. You certainly cannot allow this to happen and it will never if you are smart enough to take preventive measures.

VOLUME LIMIT EXCESS
Okay, so what gives? You would think if you made a mistake in stating your processing limits or average ticket size, there is an easy way to get out of the mess. But underwriters and high risk merchant account providers are realistic. If you make more profit than you have actually stated during the assessment period, you will be likely incurring more chargebacks. When this happens, your underwriter is liable to pay the issuing bank the losses. Obviously, the little mistake you made spelled trouble to your provider.

How do you prevent this? Find a high risk merchant account provider that is flexible with your monthly processing volume limit. This means that as soon as your ticket size grows, you can negotiate an adjustment on the discount rate and other fees.

NICHE PRODUCT/SERVICE FLEXIBILITY
Another issue that will most likely cause you trouble with your merchant account provider is your niche product or service. This is pretty easy to figure out and it's lot like choosing a domain name. Define your product or service in the broadest way possible. Pick pharmaceuticals instead of hoodia. That way if you expand your catalog or change into a different but related product/service in the industry, then it will be easier for the provider to adjust.

REFUNDS
This issue will speak for itself. Is giving refunds to your customers a bad practice? Sure it may hurt your business, but a business also has to maintain a good reputation. One way to keep it is to make sure dissatisfied customers are able to return your products and get their money back, if only because you would want them to buy again and not spread ill words about your company. Above all, you do not want them to commit fraud against your business.

BACKUP ACCOUNT
Two merchant accounts? To some business owners, having one alone can be a pain especially with high discount rates. But there's also an advantage in obtaining a back up merchant account. There is if your business relies solely in processing credit cards online! If one provider halts processing or encounters a glitch, you have support that will not put inconvenience to your business or customers. Having a backup merchant account is quite tricky but it always serves its purpose.

Frozen merchant accounts are horrible for your business. Now is the time you find out the issues with your high risk merchant account provider before your business goes down the drain!

Article Source : first ebusiness

About Author

Both Mj Hunt & Gerri Bryce are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Mj Hunt has sinced written about articles on various topics from Auto Insurance, Modelling and Online Business. For more information on Merchant Account Services visit http://www.CanadaCardProcessing.com. Mj Hunt's top article generates over 12100 views. Bookmark Mj Hunt to your Favourites.

Gerri Bryce has sinced written about articles on various topics from Customer Service, Finances and Online Business. Gerri Bryce is a versatile technical writer specializing in general web content copywriting and consultancy for finance and high risk merchant account providers. Gerri Bryce's top article generates over 22200 views. Bookmark Gerri Bryce to your Favourites.