What makes a business eligible for low risk or high risk credit card processing? Well, we’ll discuss that in a moment.
Payment methods are multiplying, but credit cards will still be big in 2020 and beyond. So businesses looking to start processing card payments should understand what’s high-risk and what qualifies as low-risk.
Card companies, banking institutions, and other service providers like merchant account providers who are vital to your card processing activities decide who qualifies as low-risk or high-risk based on specific criteria.
Generally, businesses classified as high risk are those that these institutions find it risky to partner with— in terms of the liability assumed.
So the selection criteria for most card brands and banking institutions and merchant account providers revolve around things like;
1. Type of Business
These underwriters have specifications that define different types of business from low risk to restricted, prohibited, or high risk.
The business type is determined by the product or service a retailer trades in, business model, or the unique payment processing needs of the business.
Some of the businesses that classify as high-risk or restricted deal with auctions, traveling, affiliate-marketing, e-cigarettes, card-reading, and many others.
2. Business Model
Some companies categorize as risky because of the downsides in their business models.
Any company that; offers a long-lasting warranty, delivers orders late in future or initiates multiple CNP (Card not present) payments pose a significant amount of risk to the underwriters.
3. Type of Product
Dealing with regulated products like e-cigs …