Adult entertainment and services are considered “high risk” in credit card processing, but that doesn’t mean that you don’t have options.
It’s true that you’ll want to look for a high risk credit card processor that specifically supports your industry. But the good news is that there are many processing companies willing to serve adult-oriented businesses. Before we get to the specifics of adult entertainment merchant accounts, let’s start with a quick overview of credit card processing in general.
If you’re new to processing, it’s a good idea to check out our complete credit card processing guide.
- Credit Card Processing Basics
- Processing Fees
- Defining “High Risk”
- Merchant Accounts for Adult Entertainment
- Getting a High Risk Merchant Account
- Keeping a High Risk Merchant Account
Credit Card Processing Basics
When it comes to accepting credit cards, there’s a lot of misinformation. As a high risk business, it can seem even more overwhelming, especially if you’ve been turned down for a merchant account already.
But high risk processing functions the same as non-high risk: you’ll need a merchant account with a credit card processing company and a way to accept cards. You can accept cards online (using a gateway and, optionally, a shopping cart), in person, or over the phone (using a virtual terminal.)
However you accept cards, you’ll pay a portion of the transaction amount as processing fees.
Just like other types of processing, high risk credit card processing fees are comprised of several components: interchange, assessments, and processor markup.
Interchange and assessments are non-negotiable. These fees are set by and remitted to the banks and the card brands. Processor markup is the only negotiable component. High risk businesses should expect to pay higher markups to compensate for the increased risk associated with the merchant account.
High Risk Processing Fees
Almost all credit card processors set pricing individually for each business, and that’s the case for high risk processing fees as well. As such, it’s very uncommon to see pricing published on a high-risk processor’s website. The fact is that there are too many variables that will affect the final cost for the processors to provide accurate pricing without knowing more details about your business.
That said, some high risk processors (such as CCBill) will at least publish general rate guidelines for certain business types. For example, on CCBill’s website, it lists starting costs of 5.9% + 55 cents per transaction for high risk merchant accounts.
Note that this doesn’t mean that ALL high risk businesses will pay that. Your specific business’ costs may be higher or lower depending on a number of factors, including your industry, how you take cards, your personal credit or processing history, and other details.
As with traditional processing, you’ll pay less for swiped cards than online transactions. For adult entertainment and services, you may have a mix (for example, if you have a retail store and an online shop) or you may just have one type. The processor will work with you on the rates and fees for whatever method(s) you need.
Defining “High Risk”
In processing, “high risk” businesses are those in industries that pose greater risk to a processor. It’s not a reflection on you, so try not to take it personally. Businesses may be classed as high risk due to operating in an industry with higher-than-average chargebacks, selling age-restricted items, or having little or no processing history.
In the case of adult entertainment, chargebacks are common. Additionally, there are age requirements regarding adult goods/services, and other laws may also apply. These factors can contribute to why processors class your industry as high risk.
Whatever the reason, if your business is considered high risk, you’ll save yourself time and frustration by seeking out a dedicated high-risk processor.
Merchant Accounts for Adult Entertainment
Adult entertainment and goods fall into several categories. Not all processors will support all categories.
Categories for adult entertainment and services include: video and photographs, webcams, clubs, adult dating sites, products such as toys, and escort services.
Note that even for high risk accounts, the business for which you’re securing a merchant account must still operate within federal and state laws. If escort services are not legal in your state, for example, you won’t be able to secure a merchant account for an escort business. This applies even if you find a processor that offers merchant accounts for escort services in states where it’s legal.
In Person vs. Online
In some cases, it may be easier or lower cost to get a merchant account for in-person (swiped) transactions than online transactions. Swiped transactions benefit from proof that the card was on-site. With online transactions, there’s no such guarantee. With the United States’ shift to chip cards, fraud is becoming more common online and less common in-person.
If it’s possible to accept payment in person at your business, that’s the route you’ll want to take. However, if that’s not an option, there are still high risk merchant accounts for online-only transactions.
Getting a High Risk Merchant Account
Securing an adult entertainment merchant account starts with getting quotes from high risk credit card processors. Save yourself the headache of getting turned down and skip any company that doesn’t explicitly support adult services.
CardFellow offers a comparison marketplace for requesting quotes from high risk processors. It’s free to use and no obligation. Try it here!
From there, you can evaluate the pricing you’re given to determine the right path for your business. Be sure to ask about equipment (if needed for swiped transactions) or gateways/shopping carts (for online transactions) as those can add an additional cost.
*Note: “Flat rate” style companies like Stripe and Square do not support adult businesses. The fast application means that your account may originally be approved, but once the risk management teams catch up and review the new account, your account will be frozen or closed, leaving you with no way to accept cards.
It’s also not a good idea to fudge the details in order to fly under the radar. Processors catch on eventually and it’s not worth it. Remember, as long as you’re running a legal business, there’s a processor that will support you.
Keeping a High Risk Merchant Account
Getting your high risk merchant account is only the first step. You’ll also want to make sure that your account isn’t closed due to misuse, excessive chargebacks, or other preventable problems.
Chargebacks are a concern for everyone, but are particularly important for high risk businesses. Since having too many chargebacks is a leading reason for accounts to be declined or closed, it’s important to mitigate how many you receive.
Be sure to have clear policies regarding refunds, keep your contact info easily accessible to help customers sort out problems, and implement strong security to cut down on fraudulent purchases. You may even choose to work with a chargeback management company to help you reduce and fight chargebacks.
While a 1% chargeback ratio is standard, some processors may offer a more lenient ratio. Emerchantbroker, for example, boasts that it can offer merchant accounts provided your chargeback ratio is under 3%.
3DSecure technologies like Verified by Visa and Mastercard SecureCode offer increased security for online transactions. The first versions of the programs were not popular with businesses or consumers, as they required customers to enter a passcode in a separate popup window at checkout. However, newer versions offer a more seamless solution. Some companies even offer plugins where customers don’t need to individually enter a passcode.
3DSecure can benefit all online businesses, but they’re an especially good idea for businesses that see a lot of chargebacks.
The reason is that Visa and Mastercard limit a business’ chargeback liability when you use 3DSecure properly.
Work with your processor to mitigate chargebacks and keep in touch with them about any changes to your processing profile. That will go a long way to helping you keep your merchant account for hassle-free payment acceptance in the adult services industries.