A high-risk merchant account is what makes it possible for high-risk merchants to confidently accept both credit and debit card payments, without fear of excess chargebacks and fraud.
What Is A High-Risk Merchant?
Before we dive into what a high-risk merchant account is, let’s explore what a high-risk merchant is. A high-risk merchant is one that has been categorized as having a greater level of risk of experiencing fraud or chargebacks.
There are many reasons why payment processors or banks may judge these businesses this way. It could be that the merchant sells in a high-risk industry and it sells actual products and services that have a higher propensity for fraud and chargebacks.
It is typical for a high-risk merchant to pay higher than normal fees in comparison to its lower-risk counterparts.
Also, if a merchant’s account was terminated, due to excessive chargebacks, they will be added to an “industry blacklist” known as the MATCH list. Just being featured on that list alone is enough reason for processors and banks to categorize a merchant as high-risk.
Finally, when a merchant receives a chargeback, the processor will be on the hook for the funds owed as well as the time needed to address the chargeback. Although those funds can be regained via a chargeback fee, processors would simply rather not deal with the hassle.
This is why most processors and banks choose not to work with high-risk merchants. What this means for the merchant is that they will need to seek payment processing services from a high-risk merchant account provider to open a high-risk merchant account.
What Is A High-Risk Merchant Account?
Now that we have discussed what a high-risk merchant is, let’s explore what a high-risk merchant account is. A high-risk merchant account is a type of merchant account given to a business that has been flagged as having a greater risk for fraudulent activity as well as chargebacks. All these risks are based on the business location, business model, the nature of the business, and its financial history.
In order for an e-Commerce business to accept and process credit and debit card payments, it must have a merchant account to facilitate these actions.
When a business initially applies for a merchant account, it must undergo an underwriting process. Here are what most providers determined as a high-risk business:
- Accepting multiple currencies.
- The monthly salve average is over $20,000
- The average credit card transaction is more than $500
- Sales are recurring or seasonal
- Poor credit history
- A new merchant with little to no processing history
How To Apply For A High-Risk Merchant Account
Before you apply for a high-risk merchant account, you will need to do a substantial amount of research to determine which provider offers what you need for your business.
You also have to consider the types of fees they charge, their level of customer service offerings, security features to mitigate fraud and chargebacks, as well as their contracts. It will also be helpful if your provider will be willing to support you, especially during the initial onboarding process in setting up your account. Ongoing support throughout your partnership with your provider is also necessary.
Once you have selected your provider, it’s time to gather some important documentation.
Depending on the provider, be prepared to procure the following documents to submit with your online application:
- Personal and business addresses
- Tax ID number
- Website URL
- Phone numbers
- Business owner’s ID or passport
- Business License
- A voided bank check showing your business name, address, account number, and routing number.
- Three months of your recent business account statements.
It’s Time To Apply For Your High-Risk Merchant Account
After you have gathered all required documentation, as requested by your provider, it is time to apply for your high-risk merchant account. Nowadays, most high-risk merchant account providers allow you to complete the application entirely online.
Once completed, you will submit it, along with all required documentation and your application will begin the underwriting process. It can take as little as 24 hours to receive an answer or up to a week. Once you are approved, you will most likely be paired with a provider’s representative so that they walk you through the onboarding process, helping you set up your account.
As soon as this process is complete, you can now begin accepting and processing credit and debit card payments.
Open A High-Risk Merchant Account Without The Hassle
As a high-risk merchant, you already know the difficulty of finding a reliable and trustworthy high-risk merchant account provider. Luckily, more and more high-risk providers are making it easier than ever for merchants to start taking payments, without the fear of fraud and chargebacks taking your business down.