Why do credit card processors view certain merchant accounts as high risk anyway? Simple: It could be that the industry that you’re working within (adult, gambling, forex, etc.) or your particular merchant account is viewed as especially susceptible to fraud or chargebacks.
The potential for future legal issues, high chargeback rates in the past, international transactions (e.g., forex trading) or various loan sites might come up as high risk in terms of processing credit card payments.
The Insider’s Scoop on Chargebacks
As we’ve just seen, chargebacks can happen because you’re simply associated with a particular industry or that your personal merchant account is, for whatever reason, targeted as more prone to fraudulent activity.
Chargebacks could, in fact, be associated with any of the following:
- Perceived failure to provide services/goods
- Unauthorized credit card use
- Merchant failure to provide documentation of transaction
- Customer dissatisfaction over services/goods
These specific examples of chargebacks actually fall into the following four technical categories as well:
- Clerical issues (e.g., inaccurate billing amount)
- Quality issues (e.g., wrong/deficient item received)
- Alleged fraud (e.g., identity theft)
- Technical issues (e.g., bank processing mistake)
The good news is that while one provider could consider your account high risk, another provider would be happy to give you the green light.
One provider’s underwriting risk department could OK your merchant account right on the spot. Even in industries with notoriously high rates of chargebacks, as long as you draw the right underwriting risk department, you’ll be in business with a merchant account.
To better your chances of approval, try the following:
- Require CVV2 codes on transactions
- Screen for expired cards
- Provide refund information upfront
- Have cardholder sign for delivered items
- Process transactions right away
Rules of Thumb for Success
Stay under 1%…
You have much better odds of getting a merchant account and flying under the radar of a disapproving underwriting risk department by keeping your chargebacks at one percent of total transactions per month.
…And Fewer than 100 Monthly Chargebacks
Another factor that risk departments frown upon is more than one hundred aggregate chargeback transactions per month.
Lawyer Up to Remove Listing
Let’s say, though, that you’ve already been placed on a Terminated Merchant File (TMF) or MasterCard Alert to Control High-Risk Merchants (MATCH) list…what’s your next play?
Well, if you’ve been placed on a TMF or MATCH list, or otherwise blacklisted, then the next step is hiring a lawyer to remove your listing.
MasterCard has the MATCH list as a merchant processing or acquiring bank. An acquiring bank, in turn, has a database of merchants who they’ve deemed high risk based on that merchant account violating the acquiring banks’ rules.
A lawyer will likely negotiate with the acquirer that created the listing to get you removed. You could also…
Contact a Merchant Service Provider
Another piece of good news: even if you wind up going slightly over these limits (i.e., the one-percent rule or one hundred chargeback transactions in a month) a merchant service provider can help keep your business afloat and processing transactions.
Certain industries are inherently viewed as risky in terms of chargebacks and customer purchases. Getting labelled as high risk, let alone put onto a TMF or MATCH list, you could be at even high risk for chargebacks and blacklisting. The end result: lost revenue, chargeback fees, and a potential black eye professionally.
If you’re a small business owner or working within a high-risk industry, and if you’ve already taken steps towards getting your listing removed, then contact a merchant service provider right away to start processing transactions once again.