A Complete Guide to High Risk Merchant Account Rates and Fees

Jul 20, 2015

If you currently have a high risk merchant account, you’re probably wondering how the account provider arrives at the fees. Often, you just see a figure thrown at you and you can’t make head or tail of where it comes from. As a shrewd business person, a time comes when you want to know precisely how the fees you pay are calculated even if it’s just for familiarity.

The following are what you need to know about high risk merchant account rates and fees;

  • Middlemen fees

First, you need to understand that most high risk credit card processing transactions usually have a few financial “middlemen” involved. These may include; credit card associations, issuing banks, acquiring banks (the carriers), payment gateways, and merchant account providers. All these middlemen (all those who are involved in your transaction) must be paid.

  • Markup vs. Wholesale fees

You also need to appreciate the fact that there are two broad categories of merchant account fees; markup and wholesale. Just remember that markup fees are negotiable while wholesale fees aren’t negotiable.

  • Pricing Models

There are three ways the card processor can charge the markup or wholesale fees;

The first is what is known as interchange plus pricing model which is also considered the most transparent pricing model. It has a good many terms and fees. Essentially, the markup and wholesale fees are itemized and listed separately on your monthly statement.

The second model is called the tiered or bundled pricing model. Just as the name suggests, prices are bundled. Credit card transactions are placed in three categories; qualified, mid-qualified, and non-qualified. This pricing model is very popular among merchants.

The last model is the subscription/membership model. Normally, the actual costs of transactions are charged separately from the markup fees. However, unlike interchange-plus pricing models, you will not be subjected to percentage markups, just a small transaction fee.

  • Transactional vs. Flat Fees

Transactional fees are the fees assessed whenever you run a transaction. They are non-negotiable.

Flat fees, on the other hand, refer to adjustable fees that can be negotiated all day. They tend to vary by name, value, and application but you can expect at least one of them on your credit card each month. They include terminal fees, payment gateway fees, PCI fees, annual fees, early termination fees, monthly fees, minimum fees, statement fees, IRS fees, and online reporting fees among others.

Basically, that is what you will be charged for the high risk merchant account.

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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.

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