An extended warranty business often requires some special considerations when it comes to accepting online credit card payments. Each business is unique and typically needs some extra thought when it comes to online payments, and extended warranty businesses are no exception.
Read on to learn about what you’ll need to know about accepting online credit card payments for extended warranty businesses.
What is an extended warranty business?
An extended warranty business offers an extension on a standard warranty for various products. The industry can vary: these warranties might be automotive in nature, but large appliances and electronics can offer them as well. These warranties allow customers to pay a fee in order for their warranty to cover their product in the case of accidents or damage longer than the warranty that it comes with.
What’s special about extended warranty businesses?
Offering an extended warranty sounds like a pretty straightforward business model, and it’s hard to imagine why this would require any sort of special accommodations. In fact, extended warranty businesses are actually fairly unique — and unfortunately, this means that they are usually classified as high risk. This “high risk” categorization means that sometimes it can be more difficult for this kind of business to begin accepting online credit card payments.
Although extended warranty business often are a vital and essential service for consumers, there is a higher percentage of chargebacks in this industry. That means that there’s a high incidence of customers initiating a forced transaction reversal against a merchant. It’s difficult for a merchant to dispute all chargebacks, which means that they often incur many fees and, of course, lost revenue. Chargebacks represent a huge risk for merchant and merchant gateway providers, which are necessary for accepting online credit card payments. That’s the reason why many providers are wary of extended warranty businesses and may shy away from taking them on as clients. This wariness makes it more difficult for extended warranty businesses to find a merchant account provider and begin accepting online credit card payments.
That’s not the only challenge facing extended warranty businesses. Another issue is the high rates of customer disputes. Many customers who have extended warranties will challenge some or all of their charges, and these customer disputes regarding extended warranties cause low risk merchant services to avoid the industry.
Other issues facing this high risk business include high ticket warranties that often appear as irregular expenses. This can make it difficult for businesses in this industry to apply for normal merchant accounts, since these expenses seem so unusual. A final challenge for extended warranty businesses is that their sales are both high and irregular. This uneven distribution of volume might cause problems for the business since traditional merchant account providers might terminate the account if volume spikes one month over the other.
Finding a Merchant Provider
Of course, most businesses find that accepting online credit card payments is really beneficial for their business, and “high risk” businesses are no different. So if you’re an extended warranty business that’s interested in accepting online credit card payments, what should you do?
The best solution for many extended warranty businesses is to find a merchant account provider that is willing to embrace high risk businesses. Working with an account provider who understands the unique quirks of the extended warranty business and is prepared to handle them is essential for eventually accepting online credit card payments. These merchant account providers should be familiar with business who sell big ticket services that may not be used for several months if at all, might have irregular volume from one month to the next, or have high incidents of customer disputes.
It’s also beneficial for merchants to have an account provider that’s equipped and prepared to handle higher than average amounts of chargebacks. Merchants should also look for account providers who offer great customer service, fair rates, and top notch security. Account providers shouldn’t just understand merchants that are classified as high risk, but also offer tools to help them handle the challenges unique in their industry — for example, account providers that offer tools to combat chargebacks. Accepting online credit card payments is a must for many businesses, including extended warranty businesses. Those who have an extended warranty business, or are interested in launching one, should do their research when it comes to merchant providers in order to find one that best fits their business’s needs and requirements.