If you are starting a small business, you know that it’s imperative to give your customers the option to pay you via debit or credit cards. If you are exclusively an eCommerce business, then, this is the only option you have for getting paid.
But before you open for business, you need to find a payment processor who acts as a “liaison” between you, the banks, and the credit card networks. You do this by opening a merchant account. A merchant account is a type of account that is approved by a bank or financial institution to allow the business to take credit and debit card payments from their customers.
The type of business applying for a merchant account may determine the level of risk associated with that merchant account. As a result, credit card processors assign merchants to one of two categories: high risk or low risk, based on a number of factors.
If you are considered a high-risk merchant, you will face a limited choice in payment processors, including higher fees and stricter contracts.
So How Do You Know If You Are High-Risk?
Some of the characteristics of being a high-risk merchant are listed below:
- Over 20,000 in average monthly sales volume
- Over $500 in average credit card transactions
- Multiple currencies accepted
- Offer recurring/ subscription payments
- Placed on MATCH list/ history of excessive chargebacks
- Offer mainly software, digital, tickets, seasonal items
- Based in or sell to a high-risk country/region outside the US, EU, Canada, Japan, or Australia.
Another way that the payment processor assesses your risk is by looking at your industry and sales methods.
There are some industries that have been historically prone to chargebacks and are unequivocally considered high risk. Some of them include:
- Casinos, Gambling, or Gaming
- Telemarketing, Calling Cards, VoIP
- Pharmaceuticals, Online Drug Providers
- Adult Entertainment, Dating Services
- Travel Accommodations, Ticketing Agents
- Attorneys, Bail Bonding Services
Your risk can also be determined by how you acquire your leads. The lead generation methods that increase your risk include:
- Face-to-Face (storefront)
- eCommerce sale
- Inbound call (infomercial)
- Impression-based advertising
- Lead-based advertising
- Outbound calling or upsell tactics (online or via call center)
If you fall into any of these categories, then, as a high-risk merchant, you need partner up with a high-risk merchant service provider. These processors specialize in high-risk clientele. Make sure you do your due diligence and seek those reputable processors that will not charge you inflated rates and fees.
How Do I Apply For A High-Risk Merchant Account?
Once you have looked up reviews, sought out recommendations from other fellow merchants, and you have found your ideal high-risk merchant service provider, it’s time to open up a high-risk merchant account.
Before you apply, make sure that you read your contract thoroughly. Make sure that they deliver fair fees and contract agreements. Ensure they have the appropriate levels of security within their system to reduce suspicious activity.
Applying for a high-risk merchant account is easy and straightforward. It only requires you to fill out an application online. Depending on the processor, it can take several days to gain approval by the acquiring bank. However, once you get the approval, you can start processing payments right away.
Although being a high-risk merchant can bring on more difficulties by having to pay higher than normal fees, finding the right high-risk merchant processor can save you more money in the long run.