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Do You Need an Auto Warranty Merchant Account?

An auto warranty merchant account is classified as high risk for a variety of reasons, making it difficult to find a reliable payment processing partner — but Double Helix Processing specializes in working with high risk merchants. We have multiple banking partners that offer auto warranty merchant accounts, making us the leading experts in getting your auto warranties merchant account up and running and set your business up to accept payments.

Finding a merchant account for a business in the extended warranty industry isn't as easy as talking to the local bank and their credit card processor. The reason is that extended, or auto warranty merchant accounts are considered high risk, meaning that these risk merchant service providers (like that offered by your local bank branch) cannot underwrite your business type.

Therefore, if you would like to accept credit card payments within an extended auto warranty provider, you ought to apply for a merchant account that is underwritten by a sponsor bank, to help encourage high risk businesses that make payment processing for your industry possible — that is, with a high risk merchant account provider like Double Helix Processing.

Let's put it into perspective

Let's say that when you start out setting up your eCommerce website, that you choose a company like PayPal for your credit card processing, but this option doesn't quite work out for you.

Why, you ask? The simple answer is that PayPal, Square, and Stripe (also called payment aggregators) as well as major financial institutions simply do not want your business.

They are developed to serve very specific kinds of retailers, which, unfortunately do not consist of high-risk merchants. In large part that is because they do not have the underwriting or risk management processes in place that high risk credit card processors like Double Helix Processing to mitigate the probability of loss.

The problematic thing, however, is that the sales teams at low risk credit card processors and the auto-approvals at payment aggregators do not inform you they cannot continue to support your business. And in some instances, they approve your small business and then drop you in just a few weeks — right when you really start processing. Then that leaves you with a growing customer base that you can no longer accept payments from.

That's because those low risk processors and aggregators perform their underwriting after you have started accepting payments, not on the front end like with high risk credit card payment processors. And while the procedure is easier and usually cheaper going through an aggregator or low risk processor, plenty of extended auto warranty businesses fall into the trap of applying to use a low risk provider.

How Does Being High Risk Impact Your Chances of Getting an Auto Warranty Merchant Account?

I know that it is challenging to conduct a legit organization, and that you pay your bills when they're due, so why am you considered high risk?

The answer is that "you" are not considered high risk, the entire auto warranty industry is. The reason for this is that historically, the extended auto warranty business has a higher risk of loss exposure for your sponsor bank and credit card processor.

To expound on that, if you sell an auto warranty by means of a credit card, the client has several weeks to dispute the charge. As you know, your extended warranty does not cover literally everything, so when a client has purchased a warranty simply to learn it does not cover their particular issue with their vehicle, they're likely going to file a chargeback.

As the extended warranty company owner, it's your job to respond to that chargeback. If you do not, and you do not have the money in your bank account to pay to avoid the funds being pulled out, then it comes to your credit card processor and their sponsor bank having to cover the refund. This is precisely why banks regard your entire industry as high risk since there is a greater instance or opportunity for chargebacks.

You can learn more about credit card chargebacks here.

Why Does this Matter and How Can Double Helix Processing Help with your Auto Warranty Merchant Account?

The key to success with an auto warranty company that can accept credit cards regularly, and one that loses their auto warranty merchant account, depends heavily on how they mitigate and minimize chargebacks.

Because the auto warranty industry is dominated by relatively small companies, many don't deal with this prevalent issue until it's too late, and thus their merchant accounts cannot remain open, leaving them unable to accept credit card and debit card payments in the future.

Auto warranty companies, sadly enough, are one of the biggest high-risk businesses in terms of chargebacks, because they get attacked by and are susceptible to what's called a ‘friendly chargeback'.

What is a friendly chargeback you ask? Well, it means that the consumer has officially used their specific credit card to make a purchase, but then decided for whatever reason to dispute the charge. Normally, for the auto warranty industry, this is because the client was dissatisfied with the service provided or considers that a claim should have been covered but was not.

The auto warranty merchant account has a danger of a flurry of friendly chargebacks, which is an especially big challenge because of the nature of the business.

By structure or business model, an extended warranty business might provide annual plans in a particular geographic area. A natural disaster in that region might cause hundreds of the clients to submit damage claims at precisely the exact same moment. That could negatively financially impact the auto warranty provider, and they might be unable to pay out everyone that files the claims.

This might lead to a domino effect where dozens or potentially hundreds of other clients begin to file chargebacks, ultimately bankrupting the company and leaving the credit card processor liable for those losses.

In any case, if you want to save yourself the time and hassle of applying and then promptly getting dropped, or being set up to accept credit card payments and then shut down for a variety of reasons like chargebacks, realizing your high risk industry is not supported or general customer complaints. This means that you need to apply with a high risk merchant account specialist that accepts auto warranty merchant accounts, a reputable and dependable company, like Double Helix Processing.

Why Should You Choose Double Helix Processing?

We understand the unique needs of the different auto warranty related business types and have established numerous acquiring banking relationships to become your best resource in getting auto warranty merchant accounts set up and accepting online payments. Our expertise is your ticket to getting the stable processing you need to further your business.