High Risk Merchant Account with No “Reserve”

Jun 26, 2013

Many businesses are adopting credit card payment options, as more and more consumers opt to make purchases using credit cards. It’s customary within the credit card processing industry, for the processing bank to insulate itself against financial loss risk brought by charge back. This risk is usually addressed by placing a reserve requirement on the merchant account. The reserve requirement makes it possible for the credit card processing bank to keep aside a little bit of money based on the card holder’s monthly business volume. It’s this sum of money that the bank uses to settle merchant fines and charge back’s, should the customer’s find themselves unable to settle these fines from their account.

Normally, reserves are pegged on what industry players classify as high risk businesses. Businesses are considered high risk due to their below average credit scores, merchants involved in international transactions and increasing charge back’s. Those businesses that accept payment using the card not present payment policy, such as eCommerce websites are categorized as high risk. A merchant account hold back is therefore the amount of money held from a merchant’s account by the processing bank for the sole purpose of creating a cash reserve.

Processing banks will normally ask for some form of hold back in order to establish a reserve, when handling a high risk merchant account. There are instances where the bank could waive these charges; this occasionally happens for promotional purposes hence the existence of merchant account with no reserve or high risk merchant account without a hold back.

For first time merchants, the costs associated with obtaining a merchant account are rather high. In that first time, merchant account applicants are advised that if they anticipate low sales volume during the initial stages of the account, they can then opt for 3rd party card processors. These 3rd party credit card processing companies are responsible for handling a business’s transactions on behalf of the eCommerce business. 3rd party credit card processors are sometimes referred to as free merchant accounts. These free merchant accounts can also be classified as merchant account with no reserve or high risk merchant account without a hold back. 3rd party credit card processors usually charge a percentage on each completed transaction.

The popularity of these 3rd party card processors among first time merchants is that, they require minimal upfront charges as compared to setting up a merchant account. A first time merchant is also able to do away with the additional costs associated with incorporating shopping cart software into their business website. First time merchants are advised to only establish a merchant account once they get to a certain level of earnings that enables them to maintain and operate a merchant account.

A high risk merchant account without a hold back is likely to attract higher fees and rates. With many card processing companies having to impose strict company regulation’s onto these types of account’s, they limit the provision of high risk account services to only a few providers within the industry. The provision of credit card processing solutions to high risk businesses is eMerchantBroker’s specialty.  They aim at establishing long-term and profitable relationships with merchants and look forward to helping high risk merchants.

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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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