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Contributing Author: Meghan Faye Wolff
Owning an e-commerce business is fun and rewarding, but finding an affordable online merchant account can be tough.
When applying for merchant accounts, acquiring banks will evaluate your business and may label you as a high risk merchant—and high risk means higher merchant account fees.
There are many factors that will make your business more high risk, including:
- You process more than $100,000 per month
- You have an average ticket size of more than $100
- You operate a business in a high risk industry, such as a travel agency or dating website
- You have no credit card processing history
- Your monthly chargebacks border or exceed Visa and/or MasterCard's limits
- You have had a merchant account terminated in the past
Lowering Your Merchant Account Fees
The list above probably looks a little intimidating.
Being a startup merchant makes you high risk before you even get a chance to prove yourself and being successful means you are high risk too.
Do not let this frighten you.
There are just as many ways to lower how much you pay for online merchant accounts.
1. Apply for multiple online merchant accounts.
With multiple online merchant accounts, you can disperse your monthly sales volume among two or three different accounts.
Not only will this lower your monthly sales volume per merchant account, but it will also lower your monthly chargeback ratio and how many chargeback transactions you process per account.
Using multiple merchant accounts will also allow you to continue processing credit cards smoothly if one of your acquiring banks terminates an account for no apparent reason.
2. Increase your number of lower ticket items.
Since you are more likely to encounter fraudulent transactions, acquiring banks view expensive ticket items as high risk. By selling more items with a lower ticket value—$50 or less—banks will view you as less of a risk.
3. Prevent and dispute chargebacks.
By preventing and disputing chargebacks, you can keep your monthly amount of chargebacks low.
There are many ways to prevent chargebacks, including calling customers to confirm authorization, canceling transactions with shipping addresses in high risk countries (Nigeria, Russia, Malaysia, etc.), and require a signature upon receipt of the package. If you do encounter a chargeback, be sure you dispute it.
You will still receive a chargeback fees, but at least it will not affect your chargeback ratio.
4. Use the Address Verification System (AVS).
When your customer enters his or her payment information, AVS compares how much the billing address and shipping address match.Keep in mind that AVS does not approve or decline transactions.
However, it does provide you with a single character code telling you how much the two addresses match. If you suspect the transaction is fraudulent, you can call to confirm authorization or cancel the order before shipping the goods.
If you do not use AVS services, Visa and MasterCard will charge you an additional fee—but if it helps you prevent fraud, why would you not want to use it?
5. Have your credit card processor host your payments page.
With a hosted payments page, you shift the responsibility of providing a secure processing form from you to your credit card processor, which also lowers your risk factor.
With a PCI compliant credit card processor, you can rest assured that your customers' credit card information will remain safe and secure.
6. Apply for an offshore merchant account.
Acquiring banks in offshore jurisdictions have fewer trading restrictions, which means high risk merchant have an easier time getting an offshore merchant account.
As a high risk merchant, the merchant account fees you will pay with an offshore acquiring bank will also be much more affordable.
Merchants processing credit cards through offshore acquiring banks also benefit from that jurisdictions tax laws, which means your business may be tax exempt.
7. Shop around for the best online merchant accounts.
Acquiring banks and credit card processors all have their own ways of determining merchant account fees.
If you do not shop around for the best online merchant accounts, how will you know that you are truly getting the lowest rates?
Keep in mind that shopping around does not mean you should check out 10 to 15 different credit card processors. Do your research on the company and base your decision on the company's reputation as well as the fees they offer you.
Being a high risk merchant may mean you hit a few bumps along the road, but it does not mean the end of the world. Just keep in mind that several credit card processors strive to help you make your business an online success and that anything is possible.
About the Contributing Author:
Meghan Faye Wolff is the senior copywriter and marketing specialist at Instabill—a retail and online credit card processor.
Meghan writes website content and blog posts as well as manages the company's social media. For the latest payments industry news, follow Instabill on Twitter @instabill_com.
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