High-risk merchants are not typically sought out as the ideal customer by traditional merchant account providers. This is due to the elevated risk of chargebacks and fraud. But this does not mean that the merchant is left without a solution.
What Is A Merchant Account?
A merchant account is a form of business bank account that enables a business to both accept and process electronic payment card transactions. In order for this to occur, the merchant will need to seek a partnership with a merchant acquiring bank that enables all communication within an electronic payment transaction.
All funds from your business’s credit and debit card transactions are deposited in your merchant account, once the payments have been processed. From this point, the funds are directly deposited into your business bank account.
What Is A High-Risk Merchant Account?
When you seek out and apply for a merchant account, you will be required to submit certain tax and business information, as well as undergo a credit check. If there is any indication that your business is actually a high-risk business, the provider will either refuse to open a merchant account, or you will be granted one with higher fees to compensate for the risk.
Every payment processor has its own criteria to determine whether or not a business is high-risk. If your company is deemed to be high-risk you will be charged with higher rates. This is because the provider is aware that your account is more likely to experience chargebacks, fraudulent charges, etc. High-risk merchants should expect to pay up to 1% to 2% more per transaction than low-risk merchants.
What more should you expect from your high-risk merchant account? Here are a few things to look out for:
- Early termination fees: If you are under contract, yet want out of the agreement, expect to pay an early termination fee.
- Account freezes/terminations: If your business practices have increased in risk over time, they will freeze your account, leaving you unable to process credit or debit card transactions. If this issue is not resolved, the provider could simply terminate your account.
- Keep a reserve: As further risk protection from fraud and chargebacks, providers could require that they keep an added amount from your credit card sales.
The Advantages Of A High-Risk Merchant Account
Sure, a high-risk merchant account is known to charge higher fees than its lower-risk counterparts. However, these higher fees give you the opportunity to take advantage of some great benefits to take your enterprise to the next level. Here are just some of these benefits:
- Enhanced Protection Against Chargebacks
Having a credible and experienced high-risk merchant provider means that they are fully equipped to help you navigate the high-risk industry by offering chargeback mitigation tools to protect your business.
- More Business Opportunities
By opening a high-risk merchant account, the burden falls on the provider to protect both the merchant and the customer. Also, since demand in these businesses is climbing worldwide, the business can only look forward to expanding.
- Global Opportunities
Once you have opened your high-risk merchant account, you will be equipped to accept payments in multiple currencies. You will also be able to sell to customers to low-risk countries throughout the world. This too can contribute to expanding and growing your business by introducing you to new markets.
A Respectable High-Risk Merchant Account Provider Is Key
Finding a reputable high-risk merchant account provider is vital. Take the time to do your research and find a provider that has considerable experience working with high-risk merchants. Also make sure that their platform offers top security levels, using a “multilayered approach” to significantly reduced fraudulent activity.