6 Business Characteristics That May Lead to a High-Risk Labelling

Oct 12, 2020

Banks play a significant role in the back-end of credit card payment processing and have a say on which groups of merchants they’d like to work with. So much that a merchant account provider won’t accept your application if their banking partner says no.

When applying for a merchant account, certain characteristics (that are naturally built into your business model) may lead to a high-risk classification.

While some of these risk factors are obvious— such as a business posing financial or reputational danger—others are hidden and may not appear to you until an underwriter highlights it.

 Merchants fear high-risk labeling for many reasons;

  • Difficulties getting a merchant account unless you apply with the high-risk merchant account vendors.
  • Stringent underwriting procedures and low acceptance rates
  • Higher fees. You’ll likely pay higher in merchant account and payment processing fees.
  • You may suffer sudden account termination in case of a slip-up. 

But these obstacles shouldn’t stop you from running your perfectly legal and profitable business. High-risk merchant accounts are just as useful and beneficial as their low-risk counterparts. Most of these risks are also manageable, so there’s no need to panic.

Why Would Underwriters Consider Your Business Risky? 

As hinted earlier, your business could be termed high-risk for a dozen reasons, including;

  1. High chargeback rates. Firms that risk accumulating excessive reverse charges or chargebacks (requested by dissatisfied shoppers) are a no-go-zone for banks.
  2. Handling restricted products. Selling highly-regulated items or services like Cannabis, adult entertainment, and e-cigarettes welcomes a high-risk naming.
  3. High-fraud risks. Businesses that involve fraud-prone payments like Card-not-present transactions are seen as risky.
  4. Bad Personal Credit. Poor personal credit can also lead to high-risk labeling.
  5. High-Ticket Sales. If you receive a massive amount per sale, then chargebacks can be expensive. Banks are often unwilling to welcome such huge risks. 
  6. Running an offshore company. Operating an offshore company heightens risk factors because it’s difficult to guarantee and monitor full compliance.

A bank could consider your company risky for many other reasons, but these 6 are obvious red flags. 

Partner With a Supportive Payment Provider

In such a challenging payment environment, partnering with a supporting merchant account provider & payment processor gives your business an edge. 

High-risk merchant account providers will help you right from the application process and continue this support throughout the relationship.

The best services also customize services to fit your business needs and offer protection from fraud and chargebacks.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.