You may have heard that credit and debit card payment processing for high-risk merchants can be a bit of a shady industry. So, is there any veracity to that? The answer is yes and no. It’s like a lot of fields that have a similar stigma (in fact, that’s something many high-risk merchants can understand first-hand). You could compare it to check-cashing businesses, lenders, liquor stores and so on. These are industries that attract shady companies because the customers in these niches are often of the desperate variety.
Not every business that cashes checks is shady, but they know that a lot of their customers are people who, for some reason or another, cannot open a bank account, so some of the people who work in these fields won’t think twice about charging outrageous commissions for every check cashed. The same goes for payday lenders. Some of them are quite reasonable, others may have you paying several times the loan back, like bookies in some gangster movie. In all of these industries, however, the problems are not uniform from one business to the next. The ratio may vary from one field to another, but in almost any industry you are going to see a number of people trying to take advantage of the desperate, and a number of people just trying to make an honest living like the rest of us.
Of course, just knowing that there are honest payment processors out there isn’t much help if you don’t know how to tell the difference between these processors and those that are looking to hit you with outrageous charges for poor service. Luckily the difference isn’t that difficult to tell. It requires a little bit of patience, that is: If you’re not desperate, you won’t be a sucker.
Here are some tips…
High Risk Merchant Account Providers: Have Some Bargaining Power
The shadiest of payment processors tend to prey on the most desperate of merchants. These are merchants who just can’t find anyone else to do business with them, and are willing to take whatever they can get. Yes, being a high-risk merchant already means that you have fewer options than the next entrepreneur, but there are degrees of high-risk. If you have a very high rate of chargebacks, even for a high-risk merchant, then you are going to have fewer options for payment processors willing to take your business, and those who are may be willing to take advantage of the fact that they can effectively make the rules up as they go.
The best way to make sure that you don’t get taken advantage of is to simply make sure that you have options, so that you can negotiate from an advantageous position and shop around for a processor willing to cut you a fair deal. This means that, while you may be a high risk merchant, it’s worth taking the time to lower that risk as much as you can when shopping for a payment processor to partner up with.
Here’s how you can do that:
- Always dispute the chargeback. You won’t always be able to get the chargeback overturned. In fact, you won’t often be able to get the chargeback overturned. But the act of disputing the chargeback alone is helpful. You’re not admitting fault, so you’re setting precedent. This will make it easier to dispute charges in the future, and sometimes you will get the chargeback turned over. Every chargeback bumps your high-risk status up a little, and every overturned chargeback makes it a little easier to shop around for a better deal from a payment processor.
- Make the follow up calls yourself. A bank or credit card company is probably never going to call you back. If they had their way you’d just forget about it and let it go. It’s up to you to make the call and ask them how your dispute is going. Give it a couple days, but don’t sit around thinking that they’re going to get back to you, no matter how assuring they sounded when they promised to get back to you.
- Look at what you’re selling. If the only reason you’re considered a high-risk merchant is because you sell tobacco at your convenience store, then it’s worth considering how of your income consists of tobacco sales. It might not be worth it to sell certain items if they’re the only thing making it difficult to find a good payment processor.
- Verify all purchases. If there’s something a little fishy about a purchase, look a little closer before finalizing it. If you run an eShop, for instance, and someone buys twenty identical smartphones at a time, then you have to ask yourself why anyone would need that many matching Android phones. If something looks a little off, take the time to contact the customer and make sure that it’s a legitimate purchase and not a case of stolen identity. Any large or unusual purchase, anything bought in very large volume should be given a followup call or email to verify that it is a legit buy. It may turn out that that guy buying fifty baseball bats is outfitting a little league team. But it’s better to be safe than sorry.
Read the Fine Print
Your best bet to really know what it is that you’re getting into is to look at the fine print. Best case scenario, the processor should be willing to give you a sample contract so that you can see what a typical deal with them looks like before you waste your time applying. But not all payment processors will offer you a sample contract to look over. The shady ones almost certainly won’t. Not to say that every processor who doesn’t offer sample contracts is shady.
Some of them develop packages that are specifically constructed for your business, rather than using a single boilerplate contract. This means that whatever they might put in a sample contract, it might not be relevant to your contract, so it would actually be dishonest to show you a sample contract as an example of what you’re getting. But, you still need to figure out what’s in the fine print before you sign anything.
If you can’t get a sample contract, then peruse their site for terms and services and any other legal language you can find. If there are any words or phrases that you’re not grasping, well, that’s what business lawyers are for. And if you run a small business and don’t actually have a lawyer, then you probably at least have a friend who knows a little bit about business law. If it really comes down to it you can do some online research to figure out exactly what all that legalese means. That can be a bit of a headache, but if you set aside an hour of your day to figure it out, it shouldn’t be impossible to wrap your head around it.
Of course, the more convoluted the legal language, the more likely the processor is to be a little on the shady side. Ambiguous contracts are a favorite tool for companies to be dishonest through vagueness rather than transparent transgressions of the law. In any event, read whatever legal documentation you can find before making a deal with a payment processor.
Read Reviews and Ratings
Not all payment processing services are listed with the Better Business Bureau. It’s kind of a niche industry, and there are niches inside of niches. For instance, not all payment processing services will cover firearms or tobacco. There are politically and legally tricky areas surrounding these industries and for some processors, it’s not worth getting involved in. So even within the high-risk niche, you might find people who specialize in an even smaller niche.
In any event, the point is that some of these companies are a little on the small side. They may only handle a handful of clients with no real interest in trying to expand beyond their niche. This means that they’re not always going to be listed on major websites and databases like the BBB. It’s like how your favorite restaurant might not have any Yelp reviews because it’s one of those “best kept secret” spots.
But, there’s bound to be someone, somewhere, either singing the company’s praises or condemning them for dishonest business practices and poor service. One bad review might not be a dealbreaker. Sometimes someone just had a bad day or they misunderstood the contract or they were expecting more than you should expect from a payment processor. A dozen bad reviews and no good ones, though, that should raise a red flag. Likewise, it’s easy to buy one paid positive review, but most fly by night businesses don’t have the spending power to buy dozens of paid reviews (not from native English speakers, anyway).
Online reputation is a big part of running a business in the modern age, and a bunch of negative reviews will at least tell you that this company isn’t interested in managing their online reputation.
If they can’t be bothered to address serious concerns that their customers have, then how much can you really expect them to care about your needs as a customer?
Just Feel Them Out
Sometimes it comes down to trusting your instinct. If you call them or email them and they seem really hesitant to answer your questions, or if the answers are very ambiguous and non-committal, then it’s a safe bet that they don’t want you to know what a lousy deal they’re actually offering you. You’re looking for a processor that can be transparent, up front and direct with you. Vague answers and beating around the bush are a pretty sure sign of someone who’s just trying to lead you on.
Of course this isn’t to say that you want to make the entirety of the decision on instinct alone. How you feel about a processor is as good a tie breaker as any, but most of the decision needs to be made on reason, and the heavy-lifting of research and interviewing. Still, sometimes how well you work with a partner comes down to simply the chemistry that you have with them. If you feel that their customer service is unresponsive or you just don’t get a good vibe from them, then it might not be a good match.
A merchant account provider isn’t just another supplier or something. They’re a partner in your business who should be invested in your future within your industry. Hopefully, if you find a payment processor that you have a good working relationship with, then you may be working with them for years to come, perhaps for as long as you’re running your business. So making your decision is something that you need to do carefully, with lots of forethought, planning and research, and of course, some degree of trust.