High-Risk Merchant Account — What Is It? How Does It Work?

Dec 27, 2019

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.

In Conclusion

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.

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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