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High Chargeback Merchant Account for your High Risk Business

High Chargeback Merchant Account

High chargeback merchant accounts require custom banking solutions in order to process payments. Most standard businesses maintain low chargeback rates under one percent. If your company receives too many chargeback disputes it may be time to consider finding a payment processing company that supports your needs.

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When Are Chargebacks Too High?

Every chargeback is bad for business, but the occasional one does happen. Nonetheless, merchant account providers set standard limits on what they expect a normal business should receive. The normal allowed range for chargebacks is anywhere under 1.5% – 2.0%. Exceeding these numbers can get you in trouble with your payment processor who may end up dropping your account if they see these numbers trending upward.

How To Increase Chargeback Allowances With Your Processor

High risk merchant accounts for chargebacks are custom-tailored for assisting businesses who may often see higher rates. First, you should shop for a banking solution that acknowledges your rate and accepts it. Hiding this information or trying to augment it in some way is a red flag for processors who can decline your application if you’re not being transparent. 

Once you share the information with them, you’ll gain leverage by showing other ways your account is low risk. For example, if you process numerous transactions each day, and have a steady sales volume. These two facets show that you’re consistent and your customers are mostly happy with their purchases.

Reversing Chargebacks Before They Happen

In most cases, an efficient USA-based customer service department and a generous refund policy will prevent most chargeback disputes. The goal is to provide your customer with the easiest path to a resolution. If they find it’s faster or more simple to go through their credit card company and file a dispute, then they may take that action instead of contacting you directly. 

Prevention tools such as AI software and fraud prevention technology give you an automatic advantage over malicious chargebacks. These software services are getting smarter each year and add that extra defense against scams and common forms of criminal theft through online transactions.

High Chargeback Industries

Some industries have higher chargeback rates because of the products they offer or their billing model. If you’re operating a company in one of the verticals below, you may be a good contender for a high risk merchant account: 

  • Adult – Online businesses in the adult space often rely on subscription memberships. As such, some customers may forget they have an ongoing payment and request a refund. Moreover, some shoppers for adult products may not be happy with their purchase and try to return the item. 
  • Continuity Billing – This type of billing continues each week, month, or year. If there is an auto-renewal setup, a customer may inadvertently make a payment that they didn’t intend to make at the initial time of purchase. 
  • Nutraceuticals – Startup nutraceutical companies often used what’s called negative option billing. They’ll send a free product and charge a customer after a certain time if they don’t opt-out of the service. 
  • Subscription Boxes – As mentioned before, ongoing payments require ongoing maintenance and some shoppers may want to chargeback a purchase they made months in the past. Depending on your refund policy this can be detrimental. 

Reserve Accounts and Security

Your bank likes to play it as safe as they possibly can. This means they want to keep themselves protected with a reserve account. The higher the reserve account the more fallback they have if chargebacks increase drastically or if the company shuts down. If you have high rates, be prepared to offset them with a large reserve account so your underwriters can process your application quickly.

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