Are You Considered A High-Risk Merchant?

Jul 22, 2020

Accepting credit card and debit card payments is the established way that businesses get paid in our modern economy. Cash only establishments have mostly disappeared into the ether and many have been forced to take credit and debit card payments due to fewer customers carrying wads of cash in their pockets. 

If you are a business that happens to fall into the category of “high risk”, know that this has many implications. In order to accept any type of electronic payments, a high risk merchant account is in order.

Not sure what a high risk merchant account is?  Read on to find out more. 

High Risk Merchant Account Defined

At its very basic definition, a high risk merchant account is a “payment processing account” for any business that has been deemed high risk by a merchant account provider or processor. 

Once you have decided that you will be accepting credit and debit card payments, know that there will be some costs involved. The most prominent credit card networks such as Discover, Mastercard, and Visa will charge interchange fees in order to take advantage of their network. Merchant Service Providers or (MSPs) will also charge you processing fees in order to link the “card issuing bank” to the acquiring bank through payment processors. 

In order to protect themselves financially, both the merchant account provider and the processor charge certain fees for their services over and above the interchange fees that the credit card networks typically charge. 

How To Know If You’re A High Risk Merchant

Now that we explored what a high risk merchant account is and what it entails, let’s look at the characteristics of what makes a high risk merchant. 

First of all, every merchant account provider will have its own set of criteria that helps them determine if your business is in fact, a high risk business. Here are some general guidelines they use to categorize you as high risk:

  • Your business is located overseas, but sells mostly in the US: This situation has a major potential for fraud, especially if banking regulations in your home country are too lenient.
  • High chargebacks and fraud: This is mostly determined by the shopping behavior of your customers, not you as the merchant.
  • Products or services that are legally questionable: Selling pornography or any drug paraphernalia would definitely flag you as a high risk business.

So You’re A High Risk Merchant, How To Apply For A High Risk Merchant Account

When you set out to apply for a high risk merchant account, you need to make sure that you seek out a reputable and trustworthy merchant account provider. You can always do your due diligence and seek reviews and recommendations from other merchants in the industry.

Much like applying for a traditional loan, there is an underwriting process that needs to be done by the account provider so they can assess the amount of risk involved by adding you to their portfolio of clients.

What they take into consideration is the following:

  • Personal credit history
  • Company finances
  • The number of years you have been in business
  • Merchant account history (if you’ve had a merchant account before), they will check for your history of chargebacks. Are you on the Terminated Merchant File (TMF)?
  • Your merchant category code

Do keep in mind that your merchant category code will determine what rates you will end up paying for every credit card transaction. 

Stay Informed 

This is just a basic overview of what being categorized as a high risk merchant entails. Do your research to determine which high risk merchant account provider will best serve you in your industry. 

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.

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