Being told your business falls into a high-risk Merchant Category Code (MCC) can bring some unwanted consequences, such as a flat no to your merchant account application. So, if your MCC puts you in this position, you deserve to know who decides you are high-risk and why.
MCCs and their meanings are set by the International Organization for Standardization (ISO), which is based in Switzerland, but they do not decide how they are treated in terms of fees. Each of the card networks such as Mastercard, Visa, Discover, and American Express have their own lists of MCCs. They are similar but there are some specific differences for certain types of business. The codes are assigned by banks or credit card processors who decide how they assess the risk, how the appropriate fees should be applied and more.
High-risk MCCs are likely to involve products that are subject to strict regulations which the merchant or the product are required to meet. Categories with an above-average profile for fraud and chargebacks are also high-risk. Popular high-risk MCCs include vaping and e-cigarettes, nutraceuticals and supplements, gaming, cannabidiol (CBD) and firearms.
For many years, the US government has regulated tobacco but the emergance of vaping has changed this significantly. New regulations and guidelines, including age verification to purchase these products both online and in-store are now required. Tax laws also differ greatly across state lines. These changes affect the way vape merchants operate so places them in a higher-risk MCC.
Regulation in this industry is sporadic as some products reach the market without Food and Drug Administration (FDA) approval. Also, while there are many legitimate high-quality products produced, the industry also has a reputation for making health claims that are untrue which places them into a high-risk category.
The regulations applied to firearms vary differently from state-to-state, as do the laws covering gun accessories and ammunition. This wide-ranging variation in laws means increased liability for merchants selling these products, which in turn puts them into the high-risk category.
All of these factors are a risk to the card payment processor as they can end up being liable for the costs should claims arise against the merchant.
Donald Kadson, of T1 Payments, specialists in credit card processing for high-risk merchants, explains: “Many legitimate businesses who work hard to comply with regulation and maintain high standards of security still find they are faced with rejection or wildly unfair terms. I would advise those hard-working and ethical companies to look for a card processor that understands high-risk merchants and whose business is built to meet their needs. All online merchants need to take card payments to grow – it’s a right, not a privilege.”
High-Risk Merchant Processing can be complicated, our experts are on hand to assist you with every aspect regarding your credit card processing needs. Contact us today or Apply now! We look forward to hearing from you.