Understanding Merchant Risk: What Defines Your Merchant Services Risk Level

When you start a business and begin accepting payments, it’s important to understand your merchant services risk status. Risk status affects everything from fees to the terms of your payment processing agreement. While many businesses qualify as “low-risk,” others fall into “high-risk” categories. Others fall somewhere in between.  Knowing where you stand helps you select the best payment processing and merchant services solution for your business.

At Bankcard International Group (BIG), we specialize in helping businesses of all types secure the ideal payment processing setup for their needs. Whether your business is low-risk or high-risk, we’re here to ensure you have the right tools to grow and succeed.

What Is a Low-Risk Merchant Services Account?

Merchant Services to accept credit cards made easy with BIG

A low-risk merchant account is designed for businesses that have minimal financial risk for payment processors. Risk in this context refers to the likelihood of chargebacks, fraud, and other payment-related issues. Low-risk businesses are seen as less likely to encounter these issues, which means they often b

enefit from lower fees and more lenient account terms.

But how does a business qualify as low-risk? Here are some general characteristics:

  • Lower monthly sales volumes (typically under $20,000–$50,000)
  • Few chargebacks or returns
  • Operating in a stable, low-risk industry like retail or hospitality
  • Accepting payments primarily in a single currency, such as USD
  • Serving customers from low-risk countries
  • Time in business.  Business with a long history of clean credit card processing.

If your business fits most of these criteria, there’s a strong chance it qualifies as low-risk. Payment processors like BIG usually offer low-risk accounts favorable terms, making this an attractive option for small to medium-sized businesses that fall under this category.

The Benefits of Low-Risk Payment Processing with BIG

Having a low-risk merchant account can bring several advantages:

  1. Lower Processing Fees: Payment processors tend to charge lower fees for low-risk businesses since the likelihood of chargebacks is smaller. BIG works with businesses to minimize costs and maximize profits.
  2. More Flexible Terms: Low-risk businesses typically have more favorable contractual terms and are less likely to encounter restrictions or reserve requirements.
  3. Smoother Account Approval: BIG’s account approval process is streamlined for low-risk merchants, enabling businesses to get started with payment processing more quickly and efficiently.
  4. Simplified Chargeback Management: While chargebacks can happen to any business, low-risk businesses tend to experience fewer. BIG provides tools to help monitor and manage chargebacks, keeping your account in good standing.

How do Merchant Services Providers Define a High-Risk Merchant Account?

high risk merchant services to accept credit cards done right.Some businesses may not meet the criteria for a low-risk account and instead fall into the high-risk category. High-risk merchant accounts are usually necessary for businesses operating in industries that have higher-than-average chargeback rates, regulatory requirements, or transaction volumes.

Typical characteristics of high-risk merchants include:

  • Higher monthly sales volumes exceeding $50,000
  • Frequent chargebacks due to industry-specific risks
  • International transactions or multi-currency payments
  • Operating in high-risk industries such as e-commerce, travel, nutraceuticals, and certain service industries

BIG understands that high-risk businesses often face unique challenges in securing payment processing. We specialize in helping these businesses navigate their options and find the best-fit solutions.

Why Some Industries Are Considered High-Risk in Merchant Services

Certain industries naturally experience higher levels of chargebacks, fraud, or compliance risks. Here are a few examples:

  • Subscription-based services: Recurring billing models can result in higher chargebacks, as customers sometimes forget about renewals or are unaware of automatic charges.
  • E-commerce: Online transactions are more susceptible to fraud compared to in-person payments. This increases the risk for both the merchant and the processor.
  • Travel and hospitality: Long lead times between purchase and service delivery, such as booking travel months in advance, increase the likelihood of disputes or cancellations.
  • Nutraceuticals: Products in this category, such as supplements, face strict regulatory standards and higher risks for returns or chargebacks.
  • FirearmsWhile most firearms businesses have a low chargeback ratio they are in a controversial industry that many banks consider as potentially brand damaging.  Not BIG!

If your business operates in one of these industries, BIG has extensive experience with high-risk merchant accounts and can guide you to the right solutions to manage these risks effectively.

How to Lower Your Merchant Services Risk Status

While some aspects of merchant risk are industry-specific, there are ways businesses can manage their risk profile. Here are five simple strategies to help:

  1. Implement Strong Fraud Prevention Measures: BIG offers fraud prevention tools that help identify suspicious transactions early. Taking advantage of these tools can lower your risk status by reducing fraud-related issues.
  2. Maintain a Low Chargeback Ratio: Chargebacks are often a red flag for payment processors. At BIG, we provide guidance on minimizing chargebacks through practices like clear refund policies, transparent billing, and strong customer service.
  3. Demonstrate Consistent Business Practices: Consistency in revenue, customer demographics, and transaction types help build trust with your payment processor. The more stable your business looks, the more likely you are to be considered low-risk.
  4. Optimize Customer Communication: Good customer service can prevent chargebacks and returns. Ensuring customers are well-informed about what they’re purchasing and know how to reach you if issues arise can go a long way toward building a positive payment history.
  5. Offer Clear and Transparent Policies: Displaying return, refund, and cancellation policies prominently helps to reduce misunderstandings and chargebacks, which ultimately improves your risk profile.

Choosing the Right Payment Processor for Your Merchant Services Needs

Whether you’re classified as low-risk or high-risk, selecting the right payment processor is essential. BIG offers a range of options to accommodate businesses at every risk level. Here’s what you can expect when working with us:

  1. Customized Solutions: We understand that every business is unique, and our approach to payment processing reflects that. BIG works closely with clients to customize solutions based on risk level, industry, and business goals.
  2. Ongoing Support: With BIG, you’re not just getting a payment processor; you’re gaining a partner. Our team is here to help your business navigate challenges and maximize the potential of your payment services.
  3. Comprehensive Tools for Risk Management: From fraud prevention to chargeback monitoring, BIG provides the tools needed to keep your business safe and your account in good standing.
  4. Flexible Terms: BIG offers flexible terms to ensure businesses have the right structure in place to grow sustainably. For low-risk businesses, this might mean lower fees and faster approval. For high-risk businesses, our expertise helps you secure terms that work for your situation.

BIG Is Here to Help

Understanding your merchant risk status is crucial for setting up your payment processing efficiently and cost-effectively. At Bankcard International Group, we’re dedicated to helping businesses find the right merchant services solutions, whether they’re low-risk or high-risk. We take pride in empowering businesses to operate smoothly, safely, and profitably.

If you’re ready to find out which merchant account type is best for your business, contact BIG today. Let us help you build a secure, efficient, and customized payment processing solution that meets your needs.

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