Capped Volume Merchant Processing Increasing
Highest-risk merchants often have the hardest time finding a company willing to provide acceptance to handle credit card payments. Any store looking to accept credit card payments must have a processing company who will provide them with an account, this is the way things work. Before you can accept American Express, Discover, MasterCard, or Visa, you must find a company who is willing to grant you a merchant account. If you are current processing with another processor / acquiring bank you may be running into limits on the amount of monthly volume your processor is willing to accept from your high volume business. In other words your volume is "capped" or "limited volume" on your monthly or annual transactions. Going over your limits will raise red flags with your processor and may in fact get your account shutoff or closed abruptly without notice.
Before you can accept credit cards, you must have an underwriting bank willing to offer you an account for high ticket and high transaction volume. If you accept credit card payments, you generally receive your deposits for the item from the credit card company within 2 business days. If your customer because dissatisfied with the product after this, you are required in many cases to provide a refund. American Express, Discover, MasterCard, and Visa need to know you will responsibly return their client’s money and this is where your merchant processing bank comes in to the picture. They act as the representative who guarantees you will pay back the money as promised.
Load Balancing Option
All higher-risk businesses involve high priced items or products/services that are risky to buy because they do not work for everyone or can be deemed as a rip-off in the public’s eyes. If this is the service or product you are offering, you will be able to find credit card processing support, but it usually comes with much higher fees. If your current processor has capped your volume limits, you likely will be able to open a 2nd or 3rd merchant account and distribute the limits through multiple processors. This is known as "load balancing". Our gateway and billing solution allows you to setup a load balancing system to distribute your volume amongst several processors. Thereby increasing your volume and reducing the chance of abrupt shutoffs.
On a typical merchant account, the fees are generally 1.5 to 2% of the credit card charge. On top of this, many merchant processors charge a $5 to $10 monthly fee to provide a business with a statement of their charges and charge reversals. Transaction fees of 10 to 35 cents are also required to cover the cost of transmitting the charge to the credit card company. Finally, most credit card companies require a store or internet website to pay a minimum amount every month. If fees only come to $18 and the minimum amount is $25, you will pay that $25 regardless. You should also check with your merchant processing company and ask about annual membership fees, early termination fees, and customer service fees, as many companies require business owners to pay these.
With merchants, these credit card transaction fees can be triple what the average merchant pays. Instead of paying up to 2% for credit card purchases, you may be paying 5% to 10% in fees. You will also have higher annual fees, customer service fees, minimum payments, and transmission fees. It is critical to shop around for the lowest rates when starting up a business because the fees may become too expensive otherwise.
Charge backs are another major issue with credit card purchases. If a customer believes his or her credit card was used fraudulently or can’t remember making a purchase, they will advise their company to remove the transaction immediately. Unlike a refund, a charge back is usually used in case of theft and the company who processed the transaction is charged a higher fee and penalty of up to $50. Charge backs are costly and the one thing that any company wants to avoid! With this in mind, charge backs usually occur with online transactions where no signature is required. If you can set up a system where you are using the card’s three-digit security code or requiring a signature, you can avoid most charge backs.