High-Risk Merchant Accounts: Can You Trust Them?

May 13, 2022

With the proliferation of high-risk verticals entering the marketing place, more merchant account providers have opened their doors to serve the needs of the growing number of high-risk merchants. 

It is only via a high-risk merchant account that a merchant can process credit and debit card transactions online. They don’t have the option to open a merchant account through a traditional bank and provider. 

What Makes A Business High-Risk?

When you fall under the category of “high-risk” that doesn’t mean that you run an illegitimate business that can’t be trusted. It simply means that the particular vertical that you are in is where processors regularly see a higher-than-normal rate of chargebacks and incidences of fraud. 

Depending on the high-risk merchant account provider, there are some common factors that can place you in the high-risk category:

  • The average card transaction is over $500
  • Multiple currencies accepted
  • The average monthly sales volume is well over $20K
  • Offer recurring payments
  • Placed on the MATCH list
  • Either based or sell in a high-risk region

Which Businesses Are Considered High-Risk?

There are some businesses that are considered high-risk just due to the fact that they have a higher tendency for incurring chargebacks. Here are just some:

  • Telemarketing, Calling Cards, VoIP
  • Pharmaceuticals, Online Drug Providers
  • Bail Bonding Services
  • Adult Entertainment/Dating
  • Credit Repair/Debt Reduction Counseling
  • Travel, Accommodations, Ticketing Agents
  • Casinos, Gambling, or Gaming
  • Subscription Services (Magazines, Collectibles, etc.)

What Does A High-Risk Merchant Account Entail?

There is a price to pay when it comes to accepting credit cards. When you happen to be a high-risk merchant, the price tends to be higher to acquire these services in contrast to low-risk merchant accounts. Here’s what to expect in a high-risk merchant account:

  • More fees and terms: Due to the nature of the account, high-risk merchant account providers require higher fees and more stringent contract conditions. This is especially true if your account has been turned down by other providers. There will be other providers willing to work with you if rejected but know that it will come at a price. 
  • Bad actors: There will always be a sleazy provider that will want to take advantage of a vulnerable merchant by offering services at an exorbitant rate and with an equally abusive contract term.

Before you sign the bottom line, take time to do extensive research, read all the reviews you can find, and consult with the Better Business Bureau. Read every portion of your contract. If anything appears too complicated to understand, seek the expertise of an attorney to help you sort things out. 

  • Account reserves: In order to protect their interests, payment processors have account reserves in place. If things were to go south for your high-risk business, your acquirer will be protected from loss, thanks to the account reserve. There are currently three types of reserves:
  • Up-front reserve – This allows the processor to hold all funds from credit card transactions until the reserve balance is realized.
  • Rolling reserve – Providers can retain a percentage of your daily revenue for a limited time. They will return these funds as other funds become available. 
  • Fixed (capped) reserve – The acquirer retains funds up to a “predetermined reserve cap.” As soon as the cap is met, no other additional funds will be withheld “unless the reserve is tapped.”

Can High-Risk Merchant Accounts Be Trusted? 

High-risk merchants have no choice but to adhere to their providers’ terms and regulations. These include keeping their chargebacks low and to implement all of the chargeback mitigation tools made available via their merchant account provider.

Know that these merchants have significant “skin in the game” and are liable to take a significant financial hit with every chargeback they incur and with every fraud they experience. 

Preventative maintenance is their best bet in maintaining a good standing with their merchant account provider, keeping their business, their provider, and their customers safe. Merchants want to preserve and grow their bottom line and will not carelessly allow outside interferences to prevent that goal. 

Finally, most high-risk merchants undergo a thorough investigation into their personal and business credit standing and financial health. They are responsible to clean up any dinks in their credit and are expected to pay down their debt and have a satisfactory amount of money in the bank. All of these are criteria that must be met in order to be approved for a high-risk merchant account.

So, can you trust a high-risk merchant account, the answer is a resounding yes? 

Find The Best High-Risk Merchant Account For Your Business

Know what is critical to choosing the best provider for your business. Check out these helpful tips to ensure that the provider you choose is exactly what your business needs:

  • Accepted businesses: Not all high-risk providers specialize in your particular, high-risk vertical. If you are a cannabis merchant, you may be accepted by some high-risk providers, while rejected by others. 
  • Load balancing: Load balancing allows you to distribute transactions across various merchant accounts. They are integrated into one payment gateway. It diversifies your risk in that, should one merchant account provider drop you, you’ll have others to back you up. With more than one account, you’ll be able to process more transactions monthly. Risks for chargebacks will be significantly reduced. 
  • Read your contract: Scour the fees and rates being charged on the contract. Ask about the possibility of a month-to-month contract. Although not commonly advertised, this would be a very flexible and more affordable option. 

In Closing

If you are a high-risk merchant, know that the only way to process credit and debit card payments is via a high-risk merchant account. These merchant accounts can be trusted as they undergo rigorous investigation before they are approved and granted to the business that applies for them. 

Knowing this, all parties involved: the merchant, the provider, and the customer can rest assured that their interests will be protected during any transaction. 

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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