Best Practices for Managing your High-Risk Merchant Account

Once a good high risk merchant account with reasonable rates has been obtained, it is vital to protect it with sound management techniques.  Carefully managing your high risk merchant account is not difficult but does take effort and constant vigilance.

The very nature of high risk merchant accounts makes them susceptible to chargebacks.  When chargeback ratios are high, payment processing can be jeopardized. Communication between customers and businesses with high risk merchant accounts is crucial.  If a consumer has any questions or issues, you want them to contact you rather than calling the issuing bank.

Here are some tips on best practices for protecting your high risk merchant accounts.

Contact Information.  Make it easy for customers to contact you.  Clearly post emails and phone numbers on your site.  Promptly respond to telephone calls and emails.  This seems so basic yet it is amazing how many businesses make it difficult for a customer to reach them. Some high risk merchants worry that making it too easy for a consumer to contact them will result in cancelled orders.  The opposite is true.  Most customer service calls can be resolved quickly, leaving the customer with a positive experience with the company.

Confirm Descriptor. The descriptor is information about a purchase that a consumer sees on the monthly credit card statement.  Most payment processors limit the number of characters that can be used in a descriptor.  If you are forced to used an abbreviation due to space limitations, be sure the customer can recognize the name of your company and that a complete customer service phone number is provided.  Run a test transaction to confirm the information is correct.  For example, one high risk merchant account was astounded to discover that the payment processor had listed only 8 digits for a phone number, rater than 10 digits which was a sure recipe for needless chargebacks.

Ongoing Customer Contact.  High risk merchant accounts need to pay special attention to building relationships with customers.  Communicate with your customers on a regular basis.  Keep customers updated on the status of orders.  Email customers to advise when an order has shipped and provide a tracking number for the order.   If a product is on back order, communicate regularly with the customer and provide the opportunity to cancel the order.

Extraordinary Customer Service.  Business with high risk merchant accounts should strive to immediately resolve customer issues in favor of the consumer.   If a customer requests a refund, issue it immediately.   Some high risk merchants insist they are not going to issue a refund if a consumer isn’t “right”.  But, it is often wiser to issue a refund instead of taking the risk that the customer will initiate a chargeback through the bank.  Even if a business wins a chargeback, the chargeback still remains on the high risk merchant account payment processing statements.  As a result, chargeback ratios will appear high if the acquiring bank reviews the account or if the merchant applies for another high risk merchant account.

Fast Response.  High risk merchant accounts must respond rapidly to requests from the bank regarding customer disputes.  Consumers will often call the issuing bank to dispute a charge rather than calling the merchant.  The merchant will then be contacted and asked for information and documentation on the sale.  Answer all requests promptly and provide supporting documentation.

Account Monitoring.  Closely watch your high risk merchant account for suspicious activity.  Beware of any transactions that could be fraudulent.  Manually review suspicious orders and call the buyer for more information before shipping.

Use Fraud Protection.  Learn how to use the automated fraud protection that is a standard part of any high risk merchant account gateway.  Block transactions from countries that are notorious for high levels of fraud.  Set velocity controls on the gateway to screen out potential fraud.  Validate each credit card transaction against a standard criteria including place of origin of the order, size of the order, referring URL and other factors customizable within the gateway software.

Comply with the Merchant Agreement.  Read the terms and conditions of the merchant agreement.  Know what your processing limits are, if any, and the anticipated ticket size of an average order.   If you have any material changes on the account, contact your payment processor in advance.  For example, a high risk merchant account may run an advertising campaign that will drive more volume than normal.  Banks hate surprises but are more than willing to work with merchants if they know in advance the reason for changes in the account.

Guard Against Chargebacks.  Excessive chargebacks are the primary reason for high risk merchant account termination.  High risk merchant accounts must do everything possible to protect against chargebacks.  To help avoid chargebacks:

• Do not complete a transaction if the authentication request was declined.
• On the website, clearly disclose all merchant policies including merchandise returns, refunds or cancellation.
• Settle transactions and close batches daily.
• For high ticket items, require a signature upon delivery, including proof of identification from the customer.
• For recurring transactions, cancel the order immediately upon customer request. There will be a certain percentage of cards that do not go through each month because consumers sometimes change credit cards.  Automate card updates in your payment processing gateway or contact these customers to obtain a current credit card number and reauthorize recurring billing on the new card.