What is a High-Risk Merchant Account?

 
This refers to a payment processing account for high-risk businesses, which allows them to accept credit and debit card payments from customers. These businesses generally pay higher merchant services fees since they are prone to more chargebacks. The key factors that matter in this case are processing history and industry reputation and the reputational risk for the banks and processors that process the payment transactions.

As a result of increased transaction risks, high-risk payment payment processors are generally liable for any arising issues. That said, chargeback ratios are always recommended to remain below 2 percent of total transactions. While they widely differ depending on the guidelines of the payment processors, here are a few characteristics of high risk merchants:

• Operating in an industry deemed to be high risk by banks and processors.
• Credit card transactions exceeding $500.
• Excessive chargebacks and bad credit history.
• Monthly sales volume worth more than $20,000.
• A business that sells products to countries with high fraud levels.

 
With high risk merchants, the risks associated with maintaining accounts is often calculated differently, which means more expensive pricing models will be applied. This is because payment processes that are more complex need to be applied to these accounts. Also, they are at a greater risk of dealing with excessive chargeback amounts – creating trouble for everyone who is involved.
 

Why You Need a Merchant Account

 
High-risk merchants usually generate an impressive amount of income. This high revenue attracts risks of fraud, money laundering, and high chargeback ratios. With a merchant account that is tailored to your business and industry needs, your chargeback rate can be lowered and any tools offered by the processor can help to eliminate fraud. A regular merchant account will not cater to all unique risk points and complex business models associated with high risk merchants.

You’ll see how much your business will be safeguarded and streamlined when you get a merchant account from a reliable credit card processing institution that caters to high-risk industries and merchants.
 

Factors to Consider Before Acquiring a High-Risk Merchant Account

 
The financial market has very many high-risk credit card processing institutions. As such, business people need to thoroughly research before choosing a payment partner. Here are some of the things that ought to be considered before making a final decision:

Customization and Flexibility – High-risk processors should allow users to implement different payment scenarios tailored to all business needs, more so when one is running a complex business model. Every form of payment element has to be customizable, and it should also be possible for the conditions, rates, and features to be discussed to tailor them to specific business needs.

Responsive Support – If anything goes wrong in an in-app or website payment, there should be someone ready to help. Credit card processing providers should give high-risk businesses a guarantee of addressing every issue that arises with accepting payments from customers.

Transparent Pricing – A payment processor agreement should have a pricing structure well displayed to help business people access precise information about fees and other costs. There shouldn’t be any extra or hidden fees.

Read the Contract Carefully – The terms and conditions of a high risk payment company contract should be read thoroughly.

Security Indicators – High-risk merchants need payment partners that offer a set of anti-fraud tools who adhere to strict security rules to keep businesses free from fraudsters. A good payment processor should have a multilayered approach to security and a decent system for chargeback prevention.

Technology – It’s also important to check if a prospective payment processor offers multiple accounts. To have full control over the payment and set up processes, it should be possible to access the platform’s APIs. The platform should also have a fast payment and on-boarding process designed for users without any surprises or downtime. Payment companies with legacy technology should be avoided.

Expertise – It’s important to research and get to know the background of the company leaders and how long the payment company has been on the market. Their knowledge and expertise of niche industries should position them as leaders. This ensures the payment platform under consideration is reliable to guarantee safety.

Accepted Business Models – It’s important to find out if a credit card processor will work with industries and countries under which your company operates. Payment processors that are reliable display a list of supported countries and business models on their website.

Checking Payment Processor Websites – The high-risk payment processor’s website should be visited to check if it has updated information. A basic website without any updates that makes one feel outdated could be a sign that everything isn’t right with the company under consideration.

Before applying for a high-risk merchant account, it’s always important to thoroughly read the terms and conditions, as they might be stricter than the rules of a regular account. Most importantly, look out for extra or hidden rates, fees, as well as the extent of the rolling reserve.