High Risk Credit Card Processing



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High Risk Credit Card Processing 101 - History

Any merchant (which means a business owner) who would like to accept credit card payments will need to have a credit card processing account, also know as a merchant account. In other words, unless you are a cash only business you will need to get credit card processing account to be competitive. The function of a merchant account is like a bank that extends you credit. The bank you have the Merchant account through will pay you for the transactions customers make to you, trusting you are committed on your end to provide the products and services you are selling. This works well for the customers as well as they have more trust when a credit card transaction is accepted as they know if there is an issue with the business they can also call up the credit card company to help.

Credit card processing is needed to facilitate the complex relationship between the credit card companies, the customer, and your business, and the payment processor that is being used. The benefits of using the system is shared by all parties involved. The customers making the purchases has an additional layer of protections against being ripped off. The banks have a protection against loss. The owner gets the benefit of receiving the fund in a quick manner. Everyone will also be held accountable based on the rules of the credit card agreement that all parties sign.

There isn’t much free in life and this is no exception. The wonderful benefits of a merchant account will come with fees from both the banks and the credit card processing networks. But its beats the alternative of giving out credit yourself to customers you just met. (which was how local stores conducted business back in time of yore)

Types of High Risk Credit Card Processing

There are several types of credit card processing accounts each fit based on the type of merchants and the products being sold. The most common credit card processing accounts include tradition, MOTO, Internet-based, and Mobile. 

Traditional Account with Equipment

These types of credit card processing accounts are used mostly for retail businesses – departmental stores, groceries, etc. they are also used in places where the transaction is processed at Point of Sale (PoS). Also called PoS accounts, they have the lowest costs as the risk of a chargeback is quite low.

MOTO (Mail or Telephone order)

This types of credit card processing accounts allows you to process customer payments using phones or direct mail orders. Merchant accounts of this type generally have a higher cost due to the increased risk involved with no face to face transaction with the cardholder. (also known as a card not present environment)

Internet-based credit card processing (Ecommerce/Website order processing)

This type of credit card processing account is the most popular one. According to the number of consumers browsing the buying online will hit 270 million by 2020 while sales can top $523 Billion.

Mobile or Wireless credit card processing account

This merchant account is designed particularly for small businesses, solo professionals, and mobile services – including lawyers, contractors, consultants, landscapers, contractors, consultants, repair merchants, etc., who are always on the move and require payments to be processed on the spot.

High-Risk Credit Card Processing Accounts

Although not technically a type of credit card processing account, these types of businesses are categorized as “High Risk” and finding a processor who is willing to take your account can be difficult. High-risk merchants range from multi-level marketing firms to travel agencies, to credit restoration merchants, to casinos, to online pharmaceutical companies, and adult/dating merchants. To get approved for these types of merchant accounts you need to use a company that specialized in this market such as Pinpoint Intelligence. Click here for a Free Quote.

Can you have several types of credit card processing accounts?

The simple answer is yes. Some businesses can have credit card processing accounts of different types. These types of merchants are called multi-channel merchants because they sell their goods through a variety of different channels. Retail stores are the most common types of these businesses.

The simple answer is yes. Some businesses can have credit card processing accounts of different types. These types of merchants are called multi-channel merchants because they sell their goods through a variety of different channels. Retail stores are the most common types of these businesses.

Credit Card Processing Account Requirements

The Following is a non-exhaustive list of requirements that you will have to meet and documents that you must provide:

  • Application form. The form will collect your personal and business address, social security number, Tax ID if applicable, email address, phone number, web address, bank account details, etc.
  • Personal guarantee (only for-profit organizations). This guarantee is required from the owners of all privately held businesses. Generally, sole proprietors do not need a personal guarantee. Non-profits are also not required to provide a personal guarantee.
  • Articles of Incorporation. You will have to provide proofs that your business has been incorporated legally. This is not applicable if you’re a sole proprietor.
  • Business license. You will need to provide a permit if your business requires one – either a state or a federal one.
  • Business financial statements. If your business is not a new startup, you’ll be required to provide its financial statements. You will be expected to produce financial statements for the two years preceding the date of application.
  • Personal financial statements. Asides business financial statements, personal financials may also be requested. Personal tax returns for the last two years will generally be enough.
  • Personal and business credit history. Processing banks will check your business’ Dunn & Bradstreet credit file where applicable. Your personal credit files will be reviewed as well.
  • Compliance with the Payment Card Industry (PCI) Data Security Standards (DSS). This compliance works to ensure that account details of customers are adequately protected.

Can you have several types of high risk credit card processing accounts?

A credit card processing account statement shows you the total amount of transactions you have accepted. It includes a breakdown of the types of cards you have accepted for example Visa/MasterCard. It will also contain the fees that are being charged by your merchant acquirer.

To make things more complicated each merchant acquirer may be using different terminologies and formats for their credit card processing account statement. Consequently this makes it difficult to actually work out the exact amount you are paying per transaction or compare your real cost with other companies. A typical merchant account statement will include three sections. The first section is usually the Summary Page, followed by the Settlement Page. Finally, the last section should give you a breakdown of the charges. 

Credit card processing Account Fees are part of having a merchant account. The merchant account provider will charge your merchant account fees for allowing you to process payments. The merchant account fees are not all taken by the merchant account provider has it is a multifaceted platform. This means that the payment is facilitated by the usage of several networks. Each of these platforms will receive a portion of the merchant account fees.

When a payment is made with the credit card to a merchant account, some of the credit card processing account fees are deducted by the card-insuring bank, this fee is known as the interchange rate. (This will be the bank associated with the customer’s credit card that was used to make a purchase such as Chase or CitiBank) Another fee gets paid to the merchant account provider (the company handling the merchant account), such charges are called the merchant account fees. (or the Discount Rate Fee)

Sometimes the card insurer pays the bank handling the merchant account, in such a case the fee is known as the reverse interchange fee. It occurs when a cash withdrawal transaction is made using the ATM. This payment is used for the machine maintenance. This can be exemplified to mutual relationship, where both parties benefit. Click here for a Free Quote.

Are credit card processing account fees easy to figure out?

According to Pinpoint Intelligence, a credit card processing account provider, figuring out the merchant account fees can be very complicated as they are based on several factors including:

  • Card brand
  • Region and jurisdiction
  • Credit or debit card
  • Type and size of the accepting merchant
  • Transaction type

These credit card processing account fees are stipulated by the credit card provider such as Visa and MasterCard. In the US, it is around 2% of the transaction value, the lion’s share of this percentage goes to the card issuing bank and the remaining goes to the card provider, Visa or MasterCard. (The amount of the credit card processing account fees that goes to Visa/MasterCard is around $0.12)

The issue of the credit card processing account fees has been controversial over the years. Merchants across the world have made several efforts to ensure this fee is reduced to a more plausible rate. But, the issuing banks have disclosed that, reduction in the merchant fee rate would be detrimental to consumers as it would result in increased costs for cardholders, and reduce their ability to satisfy rewards on cards already issued.

Credit Card Processing Account Laws & Regulations

There are some regulations that govern the use of a credit card processing account. These laws are in form of rules and regulations; they are used for progressive decision making. below are some of the most common laws:

  • Merchants are required to report their gross payment card transactions processed by credit, debit or co-branded cards and third-party network transactions to their merchant services provider annually.
  • All transactions are authorized via the authorization centers to avoid charge back or termination of merchant agreement.
  • Credit card terminal balancing should be done on a daily basis to avoid loss of sales.
  • No additional charges should be added to the actual goods or service fee as a means to further the merchant margins
  • The authenticity of all credit cards to be used for transaction must be affirmed.
  • Credit card processing Account Fees must be within the regulated amount


A credit card processing account agreement is a contract between a provider of credit card services and a business owner. It defines the rules and what each party is expected to do regarding acceptance of payment card, authorization, settlement, and processing. The agreement also establishes the fees and charges that the merchant will pay the service provider. It talks about how the service provider determines the rates for handling transactions involving payment cards, as well as defines the conditions under which each party may renew or cancel the contract.

Although credit card processing agreements may vary depending on the service provider, there are few rules you’ll find in a merchant agreement, and they are shown below:

  • The merchant must accept every valid card issued by the payment network. For instance, a credit card processing agreement with MasterCard could demand that the merchant accepts all MasterCard cards whether credit, debit or prepaid cards.
  • The logos and trademarks of the payment cards a merchant accepts must always be displayed prominently on the merchant’s website.
  • The merchant may not mandate customers to pay a certain surcharge on transactions involving payment cards unless in countries where practices like that are allowed.
  • The merchant may define a minimum threshold for transactions involving payment cards. The minimum amount could be $10 for instance.
  • The merchant must regulate what the card is used to purchase – this means that the merchant cannot accept the card for purchases that are illegal, such as the sale of tobacco or alcohol to minors.
  • The sales tax to the payment card must be charged together with the purchase amount by the merchant.

In addition to the above, the credit card processing agreement will contain agreements like:

  • Where a tip is obtainable, such as taxi rides and restaurant purchase, the merchant cannot authorize a transaction to include a tip.
  • If there will be any need for any refund whatsoever, the merchant cannot refund a payment involving a payment card in cash. Such refunds must be issued to the payment card.
  • The confidential details such as the credit card expiration date or account number must not be printed by the merchant on the payment receipt.
  • The cardholder’s personal information is a top secret and must be safeguarded by the merchant – this means that the merchant cannot send this to a third party.
  • The merchant must train and educate employees to recognize potentially fraudulent cards and transactions involving these cards.
  • The merchant must provide its customers with an unambiguous refund and return policy.

There are however a few things to watch out for before signing a credit card processing account agreement. One of the first things to watch out for is hidden charges. These fees can be endless, so ask up front for a total list of all the charges you may get charged. Also, make sure all the terms of the contract are clear before signing – how long will the contract last and what is the process for terminating. Ensure that you understand the pricing of the plan you’re signing up for. This will enable you to figure out which provider is the best for you. If you are getting physical equipment like credit card machines, make sure you know the state of the devices – are they new or refurbished? Lastly, to ensure prompt response to queries, ensure you get the name, email, and phone number of an actual representative of the network who can help you answer any questions you may have with your credit card processing account agreement.

Please click on the following link for an example of a agreement. Click here for a Free Quote.

Understanding the Credit Card Processing Account Application

In order to get processing you must go through the credit card processing account application process. You must make proper time to go throughly through the credit card processing account application. Better to triple check the merchant account application as making mistakes will delay the process. In order to get approved you will need to go through an underwriting process to make sure the bank you have applied with is willing to take the risk on your account.

The Credit Card Processing Account Application Breakdown – Each bank will have a unique application and requirements. However, most will have the following sections:

  • Business Information
  • Owner Information
  • Product Information
  • Processing Information
  • Data Security
  • Billing
  • Bank Disclosure/Fees/Agreement

Below will go through each section of the merchant application account with a brief explanation of what to expect.

Credit Card Processing Account Application – Business information Section

The first part of most credit card processing account applications will be known as the “business information” section. General information about your business will be required including:

  • Legal Name
  • Business Tax id
  • Business Address/Mailing Addresss
  • Website URL (make sure the link of this page is clean as the underwriter will be looking carefully at this page to make sure it follows all standard rules and regulations)
  • Customer Service Number/email address
  • Type of Ownership (i.e LLC/Partnership)

Credit Card Processing Account Application – Ownership Information

This section is generally focused on the owner of the business. If there is more than one owner than additional information will need to be provided on each owner. You will be asked about the percentage breakdown of the ownership, as well as methods to identify the owner such as driver license and social security number. Some banks may not require information on the credit card processing account application of owners who have less than 49% interest in the business.

Credit CardProcessing Account Application – Product Information Section

This part of the credit card processing account application will require you to input information about the product (or service) you are actually going to be selling. You will need to provide the Following:

  • percentage breakdown of the selling medium. (ie ecommerce/retail/mail)
  • Customer profile (individuals/business/government)
  • Type of service (subscriptions/memberships, warranty issuance)
  • Refund Policy
  • Fulfillment house or drop shipper (if selling physical products)
  • Amount of time till service/product is fulfilled

Credit Card Processing Account Application – Processing Information

This section will focus on the payment types you will accept such as Visa/MasterCard. You will also need to provide the amount of monthly dollar amount you plan to process, the average transaction amount, and the highest transaction amount. Some applications will inquire on whether you business had previously accepted credit cards. If you currently do or have in the past, additional information about those accounts will need to be provided.

Credit card processing Account Application – Data Security Information

This section will request information about your data collection process. It will include questions similar to the following:

  • Are card numbers stored or transmitted on your systems?
  • Have you completed a PCI DSS self assessment or audit?
  • What third-party products and or system do yo use to process credit/debit cards? Examples are Terminals, Point of sale systems,order systems, shopping carts, gateways, ect.

Credit Card Processing Account Application – Billing Information

Usually a short section where you will provide your banking information to get paid. You will provide information such as you bank account number, routing number, and type of account. (personal/business)

Credit Card Processing Account Information – Bank Disclosure/Fees/Agreement

This section may be one or broken down into several sub sections. The breakdown of responsibilities will be in disclosed here for both the bank, and your company. (your company in legal terms will be called the merchant) The Banks responsibilities will include settling the funds into your account and educating the merchant about the rules and regulation. Among the merchant’s responsibilities will be to agree to comply with all rules, and maintain fraud and chargebacks thresholds.

Fee Schedule sub section – Probably the most important part of the application has it will outline all the fees that will be subtracted from your transactions. This is where you will need some time to do proper research and negotiate the fees. In a standard application you should see a breakdown of the following fees:

  • Mid-Qualified (usually a lower fee charged for regular credit cards )
  • Non-Qualified (higher fees due to a business or a reward type credit cards)
  • Authorization
  • Non-bankcard
  • Electronic AVS
  • Batch Fee
  • Chargeback (Generally in the $35 – $50 range)
  • Application Fee (may be negotiable)
  • Termination Fee (varies)
  • Annual Fee
  • Monthly Maintenance Fee
  • Monthly Minimum (you only pay if you don’t hit the minimums)

Some banks will have a few more fees broken down. Some banks will not be so transparent and will show less fees (at higher rates) that included those fees not listed.

Agreement sub section – The last section will have all the legal agreements, terms and conditions, and the required signatures. You will likely need to hire an attorney to review this part to make sure you are protected. Click here for a Free Quote.


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