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3 Common Mistakes High-Risk Merchants Should Avoid

Posted on 25 July, 2014
3 Common Mistakes High-Risk Merchants Should Avoid

Source: Flickr CC

High-risk merchants carry a greater chance of loss to the banks, credit card companies and other financial entities that provide them with services. Risky merchants already pay higher fees per transaction to their account processors. Engaging in these three common activities are mistakes that can cause high-risk merchants to pay even greater fees or increase the chance of losing their accounts altogether.

Having Too Many Disputes

Too many disputes from customers can cause high-risk merchants to incur high costs of the future processing of transactions. Even if a merchant is on the winning side of the disputes, just the notification can lead to problems. One way that retailers can avoid accruing disputes on client accounts is to take the time to ensure that customers receive the correct product and services. Use trusted delivery services and insured packages to ensure online orders are not damaged during the shipping process. Merchants can also issue prompt refunds so that no dispute is filed. Avoiding the filing of disputes can help merchants enjoy a greater level of profitability on credit card transactions.

Having Too Many Chargebacks

When a merchant does not properly handle a consumer dispute about a product, service or charge to their account, the credit card banking company issues the customer a refund directly. Then the bank goes after the merchant in what is referred to as a chargeback. The threat of a chargeback from the processing bank is often enough to get a merchant to resolve a dispute because the chargeback costs are higher than any fees or penalties associated with dispute resolution. Chargeback fees increase as the number of chargebacks increase, which is why merchants should avoid these costly mistakes whenever possible.

Unusual Business Activity

Unusual business activity is a huge red flag to merchant account holders. An unusually large transaction or a significant number of the operations processed in a particular period can set off alarms with account processors. While transaction processors are regularly reviewing merchant accounts and keeping track of average volume, there is some flexibility in the size and volume of transactions. Merchants having a clearance sale and, therefore, an increase of transactions may need to furnish proof to the bankers of the situation to avoid incurring fees.

Using an account processor that specializes in high-risk merchant accounts may be a business’s key to avoiding trouble. While fees per transaction may be slightly higher, this concession may ultimately be worthwhile.

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Bad credit merchant account credit card processing services

Accept all major credit cards

Regardless of Credit History!