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Risk Difference between Low Risk and High Risk Accounts


Introduction

CCBill payments platform accommodates and supports a myriad of business models, including various risk categories, allowing for a single payment solution for the different services or products your business offers. But navigating how your processing services are categorized as a specific risk classification can be confusing.

A CCBill account can have different risk classifications depending on the type of service or product you offer, and how you offer them.

High Risk

Why Is My Account Considered High Risk?

High Risk is a term used by financial institutions to classify specific business models based on those models' overall history of chargebacks, returns, and refunds. Additionally, these business models are usually burdened with higher levels of abuse by both businesses and consumers.

If your business model is perceived as High Risk, it does not necessarily indicate that your business is at a higher risk of chargebacks. It only means that your business model and the Merchant Category Code (MCC) in which your business falls are classified in such manner. A Merchant Category Code (MCC) is a four-digit number used to classify a business entity based on the type of goods or services the company provides.

Though high risk businesses may be profitable, they can run into problems taking payments due to the financial history, transaction types and how the transactions are processed for that particular business segment. These factors affect MCC classification industry-wide.

Types of businesses that are classified as High Risk:

Annual memberships Adult digital products Bail bonds
Business opportunities Electronics sold online Debt service
Home-based Horoscope/Fortune telling Firearm dealers
Mail order or telephone order Multi-level marketing (MLM) Online auctions
Online dating sites Software downloads Telemarketing
Timeshare Advertising Telecommunications (VOIP or Calling Cards) Travel services

Important note: Please be aware that CCBill does not support all of the above-mentioned high risk business models. For more information, please refer to CCBill's Acceptable Use Policy and Merchant Terms And Conditions.

According to Which Criteria Do Credit Card Associations Categorize a Business?

As noted, credit card associations use Merchant Category Codes (MCCs) to classify a business. These are four-digit codes that define a business whenever a new merchant account is added to the System. During the registration process, Merchants are screened and those with a high risk MCC may be required to pay a fee to become a Visa Sponsored Merchant or be a part of MasterCard's Payment Facilitator Program, depending on the type of content or product represented.

With CCBill, we work with the major card brands and follow their guidelines and policies as a company. The various card brands have different systems for classification and categories, but align under standard MCCs.

Visa

Visa classifies high-risk material (selling downloadable, digital merchandise and/or services) under Merchant Category Codes 5962, 5966, 5967, 7995, and is only available to merchants in the Visa, Inc. regions of United States, Canada, and Europe.

MasterCard

MasterCard considers high-risk material (selling downloadable, digital merchandise and/or services) under Merchant Category Codes 5967, 7841, 7994, 7995, and is only available to merchants in the Visa, Inc. regions of United States, Canada, and Europe.

Additional Factors

Payments taken directly from a website for a digital item present much higher risk than in-person payments, where the person is present and the card is swiped or inserted. Furthermore, payments taken online for memberships with automated recurring billing are considered higher risk due to both the card-not-present environment plus the scheduled, indirect nature of recurring payments. Transactions without the card or person present are also subject to higher incidents of fraud, including both malicious and friendly fraud. Without the delivery of a hard good, some consumers have issues with technology, or are not happy with the digital product which cannot be returned. Therefore, there is a higher level of comfort in disputing charges.

Digital items sold in which the consumer pays in person are considered medium risk, as are non-adult digital services with automated recurring payments.

Other factors which determine risk categories can be tied to the individual business history, and are factored into the boarding process:

  • The business has been blacklisted by credit card companies on the TMF or MATCH lists.
  • The business’ guarantor has poor personal credit.
  • Products or services that the business sales are deemed to be prohibited by some, but not all banks.
  • The business sells future deliverable products, like a hotel reservation, tickets to an event, etc.
  • The business sells expensive items, like furniture or custom auto parts, etc.
  • Businesses with high sales volume, without having established company financials to support the chargeback liability.

Why Do I Have to Pay an Annual Fee?

Credit card associations charge this fee in certain regions due to various risk factors, including the type of content, with one of the primary reasons being that maintaining high risk accounts is usually more expensive due to regular fraud monitoring. Depending on the region, this fee is upwards of $500 annually per card brand to maintain this status and continue to process with their card types. (As part of our service, CCBill will collect and submit that payment to the card brands annually on your behalf, at not added cost.)

Low Risk accounts do not fall into this classification, and therefore are not subject to these additional programs or fees.

Low Risk

Low Risk accounts generally refer to specific business models with a low incident or 'clean' history of chargebacks, returns, and refunds. These business models are not noted for higher levels of abuse by either businesses or consumers and include a much larger list of relevant business models that have a common thread of actionable return policies.

Low Risk Applications and Accounts include, but are not limited to:

Non-adult digital products, such as music, video, or non-adult subscription services.
Tangible goods, including adult-related items.
Any goods delivered to a geographic and/or physical location.
Business services invoicing online for actual services.
Non-profit organizations.
Monthly recurring charges for business services, such as web hosting.