Everything You Wanted to Know About High Risk Merchant Accounts

Oct 19, 2021

High-risk businesses can be highly lucrative and rewarding if you are up for a challenge. Although the term “high-risk” does have a negative connotation, you are certainly not barred from playing the game within your vertical. Just seeing the sheer amount of players around you is a clear indication that there is room for everyone. 

However, let’s not minimize the fact that being a high-risk business does complicate the ability to access certain business necessities such as business insurance, business loans, and credit card processing. 

If you run an e-Commerce business, your only option to get paid is via credit and debit card processing, for which you will need a merchant account.

The problem?

Most traditional payment providers will not provide accounts for high risk merchants. Let’s delve into the reasons below.

Who Is A High-Risk Merchant?

A high-risk merchant is a business owner that either has a poor credit history or, more often, operates a type of business subject to more fraud, chargebacks, or they sell products that are considered “legally questionable.”

A combination of “risk-management factors” help providers determine whether a business is high-risk such as:

  • If the type of business is regulated heavily by the government
  • Whether this type of business is likely to default on their loan
  • Higher risk of incurring chargebacks
  • If a business operates within a market that is overcrowded with businesses of the same type. 

The high-risk categorization ultimately depends on the type of industry and the policies laid out by the specific merchant account provider. 

You Are Officially On The List, Now What?

Say you have been designated by a provider as being high-risk. Does that mean the end of the road of your business? Hardly. What it does mean is that you will need to pay higher fees for the privilege of accepting card purchases. 

Depending on the processor, you will either be rejected for a merchant account or approved with substantially higher fees and rates compared to lower-risk merchants. These rates can be almost twice as much as lower-risk businesses. 

Be prepared to also pay for a rolling reserve, a termination fee, a liquidated damages clause, and the list goes on. Take the time to review the contract thoroughly and carefully. 

How To Find A Reputable High Risk Merchant Account Provider

Now that you are familiar with what you will encounter as a high-risk merchant, now it’s time to search for a high risk merchant account provider

Be aware that there are some merchant service providers that claim to serve the high-risk industry when they actually charge an exorbitant price for their services. 

Do your research to determine what the standard rates are for your industry to get an idea of what fair pricing looks like. 

Here are some more helpful tips:

  • Peruse the company’s website

A company’s website and content should not be outdated. If it is, something is definitely amiss and you should take your business elsewhere. 

  • Check the company’s reputation online

Thanks to the internet, so much can be found about a company. If it is a reputable company,  you will find some positive reviews by happy customers. Conversely, there will be negative reviews if they dropped the ball on their customers. Reviews can be insightful to help with your decision. 

  • Analyze their company’s terms and conditions

Although difficult to locate online, see if you can snag a copy of the company’s terms and conditions. There is always something suspicious to be found in the fine print that most seem to overlook. Do read it carefully. 

Final Thoughts

Finding a highly skilled and reputable merchant account provider can be complicated, but not impossible. It’s about finding a provider that has a considerable amount of experience working with high-risk merchants, providing excellent customer service, and fair pricing. 

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.