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What Businesses Belong to the Nutraceutical Industry?
The nutraceutical industry covers a wide range of different businesses, from vitamins and dietary supplements to herbal products that draw on the power of nature to boost your health.
At TailoredPay, we work with all sorts of nutraceutical companies, including those who specialize in:
- Naturally-derived medicines
- Weight loss supplements
- Multivitamin and other nutritional supplements
- Performance enhancing supplements
- Cognitive enhancers
In many cases, traditional financial institutions label these businesses as “high-risk” refuse to provide them with the merchant accounts they need to do business online. Fortunately, TailoredPay can help businesses in the nutraceutical industry find the right high-risk merchant account for their needs. TailoredPay also works with both small and large businesses across multiple industries and sectors. Even if you have been previously rejected by other credit card processors or have a bad credit score and numerous chargebacks, we still may be able to help. All you have to do is apply, and we could approve you in the next couple of days.
Since there is such high demand from the public for these products, companies of all shapes and sizes can achieve great success within this industry. While smaller businesses and startups can focus on providing a specialized, targeted product, big corporations can market more generic products to a wide audience.
If you are knowledgeable about your products and have the drive to succeed, then the nutraceutical sector could be for you.
What Info Do I Need to Provide for a Nutraceutical Merchant Account Application?
We think that applying for a merchant account online should be as simple as possible, so we have built our application process with this in mind. The process begins with our clear, simple application form, which takes just minutes to complete. In addition to this form, we will also need the following materials:
- Some form of government-issued ID- for instance, a passport or Driver’s License
- A voided check or bank letter
- Full bank statements for the last three months
- If you have already been processing card payments, then we will also require a three-month history of these statements
- A chargeback ratio of less than 2%
We also ask that online businesses have a fully secure and functional website before they apply for a merchant account with us.
Problems with Nutraceutical Credit Card Processing
In short, nutraceutical companies are at a higher than average risk of receiving chargebacks. This is largely because the industry is not as regulated as the conventional medical world.
This means that companies are often free to make claims about their products which simply aren’t true. They have no obligation to back up their claims through trial results or research, and there are therefore many companies out there who sell what are effectively placebo pills.
In addition, many people buy supplements assuming that they will act as a “miracle cure” and don’t bother to do anything else to improve their health. They continue to live inactive lifestyles and eat junk food, and then complain that the supplements aren’t working.
This can often lead to customers filing chargebacks- not the nutraceutical company’s fault, but still an issue which needs to be taken into consideration.
Free Trials and International Regulation
Problems can also arise from the way in which nutraceutical products are sold. In particular, many companies offer free trials for their supplements, but then automatically charge customers when the trial period has finished. If customers fail to cancel this billing before it takes place, then they could file a chargeback against you to retrieve their money.
While the US has lax regulations on nutraceutical products, that’s not the case everywhere. There are some countries which have banned the sale or possession of certain products and ingredients, and it’s up to you to ensure that you are permitted to ship to customers.
By putting a process in place to verify a shipping address before you proceed with the transaction, you will be able to save yourself a lot of money and hassle on having products confiscated at customs. You’ll also avoid excessive shipping costs.
Special Considerations for Nutraceutical Merchant Processing
While many nutraceutical companies are legitimate businesses, there are a lot of people out there who make false claims about the benefits of their products. Some are even outright frauds and lie about the ingredients contained in their supplements.
This will ultimately lead to a lot of unhappy customers who will dispute their credit card transactions, and it could even lead to legal issues. These common issues make it more difficult for all nutraceutical merchants to obtain good terms from credit card processing companies.
Chargebacks Cost Credit Card Processors Money
At the end of the day, if your business is subjected to a high number of chargebacks, then your credit card processor is going to lose money as well. If businesses can’t afford to cover the costs of customer refunds, then the money has to come from the card processor.
It is therefore easier for financial institutions to cut their losses, and simply terminate the account of any merchant who receives a lot of chargebacks.
Credit card processors also have to answer to their sponsor banks, and if they take on clients with high chargeback ratios, it could lead to serious consequences for them. No individual merchant is as important to a credit card processor as their relationship with their sponsor bank, so if they have to choose, your business is going to be the one that suffers.
Fight Back Against Chargebacks
The more chargebacks you receive, the more your business will be damaged. While it will still cost you money, refunds are almost always preferable to chargebacks. If the customer gets in touch with you first, then you should offer a refund before you get to the point where they file a chargeback.
Many chargebacks are filed because a customer simply doesn’t recognize a certain transaction on their credit card bill and they naturally assume that the purchase was made by someone else using their card.
For this reason, it’s a smart idea for nutraceutical merchants to include their name and contact details in their billing descriptions. This allows customers to get in touch with you, instead of automatically filing a chargeback.
In addition, you may want to set up your payment system so that customers receive a confirmation email after they make a purchase. You can also include a link to a customer satisfaction survey. Not only does this help you get valuable feedback on how you can improve your service, but it also makes customers see your business as much more open and friendly. Everybody wins!
If you just ignore your chargeback ratio and hope that everyone else does too, then you’ll only end up harming your business in the long run. Not only will you lose money on sales, but you could also lose the ability to process credit card payments.
Chargebacks Can Have a Big Impact on Your Business
While there are many different reasons why companies might receive chargebacks- including ones which weren’t your fault- credit card processors aren’t interested in the specifics. For the most part, they will just look at your total chargeback ratio. If it’s above 1%, then they will usually reject you outright.
Therefore, it is important to keep your chargeback ratio as low as possible in the long run. A lot of startups believe that once they have been approved by a credit card processor, that’s the end of the story. Unfortunately, though, if your chargeback ratio rises above 1%, then you could well find that your merchant account is automatically terminated.
This is one of the worst things that can happen for your business, since once you have been cut off by one credit card processor, most other processors will automatically reject you. Even if they are willing to work with you, it will typically be under much tighter terms and restrictions.
TailoredPay does offer a solution to this problem. We do not automatically reject merchants who have been dropped by a previous company. Work with us to see what account terms you might still be able to obtain.
What Red Flags do Credit Card Processors Look For?
Of course, there are many other factors which can have a negative impact on a merchant’s risk rating. These include:
- An overdrawn bank account
- A history of late payments, or a failure to pay bills at all
- High chargeback ratios
There are steps that merchants can take to prepare for this evaluation and lower the risk that they pose. These include paying off all their debts and bills, keeping their bank account in the black, and working with business partners who have a strong credit history.
If you do this, then you may well be able to avoid some of the restrictions that come with high risk merchant accounts, such as limits on the number of credit card payments you can process.
How to Get a Better Deal on Your Merchant Account
The main job of an underwriter (the person in charge of reviewing your application) is to analyze how much of a risk each business poses. Some businesses, like collection agencies, firearms dealers, and nutraceutical merchants tend to present higher risk than others. Quite naturally, credit card processors don’t want to cover the cost of a significant number of chargebacks from a client.
For that reason, the first step in the process involves checking that the nutraceutical merchant is above board, and that their business is stable and operated within the relevant laws and regulations.
Some of the factors which go into determining the risk of a business include their current credit score, their bank statements (to check if they are operating at a profit or a loss), and their website.
This last point may not sound all that important, but it is crucial that businesses make it clear to their customers what their privacy and refund policies are.