You also may be concerned about what the credit card processing fee will be, as well as other costs associated with setting up this service. These can vary widely, especially if you are a high-risk merchant.
The good news is that once you know what factors impact this distinction, you can make a more informed decision, one that is most suitable for your business and circumstances. It will also help you avoid any unwelcome surprises down the road. Keep reading to learn all about Visa and Mastercard high-risk setup , registration, and the Visa/Mastercard high risk registration fee.
Credit card transactions account for 28 percent of all payments made in the United States last year. That number will only continue to climb moving forward.
If you are a small business or are considering opening one, you know that credit card processing offers a great deal of convenience to your customers. Depending on where you live, having this availability may be essential to maintaining a solid customer base.
What Determines if You Are a High-Risk Merchant?
A high-risk merchant is one that puts banks and payment processors at risk. It does not mean you have done something to deserve it. It could simply be the nature of your business or the amount of sales you do.
Volume is a major factor in determining risk. If you process tens of thousands of dollars a month, or if you have a very high per-transaction rate, you may qualify as high-risk.
Accepting international payments comes with a greater risk of fraud, which could cause a processor to denote you as high-risk. If you are a brand new business that has no history of processing credit card transaction or have a low credit score, that too could elevate your status to high risk as well.
One of the most common ways that merchants get a high-risk designation is the nature of their business. For instance, if you run a subscription-based company, it is more likely that customers will try it than cancel. Industries like travel, gambling, e-commerce, CBD and vape products, and debt collection agencies often get a high-risk demarcation due to the nature of their business.
What Does Being ”High-Risk” Mean for Payment Processing?
Being a high-risk merchant means that processors and banks must do something to protect themselves from risk. That is because they are responsible for lost revenue from transactions involving fraud or abuse. This usually translates to special registration fees and higher or differently-structured processing fees.
Some payment processors will not agree to do business with merchants that fall into this category. But many payment processors specialize in this type of business.
Set-Up Visa/Mastercard High Risk Registration Fees
Sep-Up fees are distinct from registration feeds. As the name suggests, these cover the costs of setting up your merchant account. They can be upwards of several thousand dollars, depending on the agency you use.
Also, note that some processors might waive or reduce these charges to be more competitive. The important thing is that you ensure that these are spelled out in the contract
Registration
So that you can begin accepting credit card payments, the processor will need to register your business as a high-risk merchant. Both Visa and Mastercard charge a $500 fee every year for the registration.
Once registration is complete, it is a good idea to take a look at your Merchant Category Code (MCC). This is a four-digit number that applies to the type of goods or services you provide. The credit card company will create this code once you are registered with them, and they start accepting payments from you.
These are important for tax purposes but also because they are used to denote riskier lines of business credit. There are myriad online tools for accessing your MCC.
The most important thing to look out for is if you are not categorized as a high-risk merchant. That means you will not have to pay a special high-risk registration fee each year. This is the case even if your payment processor disagrees with the categorization.
High-Risk Credit Card Processing Fees
There are many different models for setting up what credit card processing fee high-risk merchants will pay. The rate should be the same for Visa processing and Mastercard processing but could differ for other types of cards.
The most common is a flat rate, where there is either a fixed percentage or a fixed fee per transaction. These are ideal for businesses with a low processing volume. Note that these rates could come down over time once you have established a good relationship with the provider.
A tiered model allows the processor to group transactions based on the level of risk. Examples are “qualified,” ‘mid-qualified,” and “non-qualified” rates.
Qualified rates meet all the requirements of the provider. Examples include in-person transactions in your store. Mid-qualified rates apply to transactions that may entail a higher risk of fraud, such as online transactions.
Non-qualified rates apply to transactions like e-commerce or reward cards that meet none of the processor’s requirements. They will carry the highest fees.
The big downside to this model is that the processor gets to determine which transactions fall into said categories.
There are other models, such as “subscription,” where you pay a set fee every month and then a fixed percentage per transaction. These can save you money if you have a higher processing volume.
Return Fees
A final thing to ask about when setting up registration is return fees. These are special fees on credit card transactions for returned items or refunds.
Note that, in these scenarios, you will not be reimbursed for the original transaction fee. It is easy to see how high return fees can substantially add to losses, especially for businesses with a lot of returns.
Learn More About High-Risk Registration
Now that you have an idea of how high-risk setup and registration work, you can determine if this route is best for your business. The important thing is to ensure that all the fees and rates are laid out in the contract and that you understand them from the outset.
For the last 15 years, Zen Payments has been the nation’s leading high-risk merchant account. We pride ourselves on supporting your business by giving it the tools it needs to succeed. Reach out to one of our trained and experienced merchant services specialists today to ensure you get the lowest setup and registration rates, as well as the best credit card processing fee available for your industry.
Josh Phelps is an experienced sales professional with eight years of expertise, including four years in payment processing. Throughout his career, Josh has successfully secured approvals for thousands of businesses, demonstrating his skill in navigating and optimizing the payment processing landscape.
