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Opening A High-Risk Merchant Account

The essence of any e-Commerce business is the ability to process debit and credit card payments. To process payments, you will need a merchant account to process all of your card transactions in a secure and seamless manner. 

If you happen to operate a high-risk business, you will face difficulties trying to acquire a traditional merchant account.  As opposed to applying for one as a low-risk merchant, a high-risk merchant may be required to jump through many more hoops. 

It’s not that you are running an illegal operation, it has to do more with all of the risks involved with running this type of business. These are risks that traditional banks and processors simply do not want to be a party to. 

So what is the solution? A high-risk merchant will need to acquire a high-risk merchant account for all of their card processing needs. 

A High-Risk Merchant Account Defined

As a high-risk merchant, you will need a high-risk merchant account to process your card payments. Let’s explore what a high-risk merchant account actually is. 

A high-risk merchant account can be seen as a type of bank account where credit and debit card transactions are held until it is finally settled. Here, all applicable processing fees are deducted. Then the funds are transmitted to the merchant’s business bank account. Merchant accounts are typically issued by payment processors or a merchant acquiring bank. That being said, these processors aspire to minimize their exposure to risk. 

What Makes A Business High-Risk?

So why are traditional merchant account providers not too keen on working with high-risk merchants? There are many reasons. Here are just a few:

  • Higher risk for fraud
  • Higher risk for chargebacks
  • Reputational risk for banks
  • Poor personal credit score
  • Recurring or subscription billing
  • High ticket sales

Another way that businesses receive the high-risk category is through the type of industry they are in. This is determined by the merchant category code. 

Also, a traditional banking institution could place a business based on the high amount of government regulation tied to the industry, such as tobacco, alcohol, and firearms. 

The jewelry industry is considered high-risk due to its substantial average ticket price. Other industries are regarded as high-risk due to their seasonal nature and erratic revenue such as accounting, construction, and agriculture. 

It must be pointed out that many providers have their own criteria when determining whether or not a business is considered high-risk. Even if your own business does not fall into the aforementioned categories and industries, the truth is that you won’t really know where you stand until you apply for a merchant account. 

Why You Should Open A High-Risk Merchant Account

Although it may seem that having to resort to opening a high-risk merchant account has a lot of negative connotations attached to it, it actually has quite a few benefits. Let’s look at what they are:

  • Higher chargeback limits & refund ratios
  • More  payment methods accepted
  • Lower risk of account closure
  • Access to foreign markets and currencies
  • Fewer restrictions on ticket sizes and sale volume

That is not to say that high-risk merchant accounts do not come with their own drawbacks. First of all, it takes considerably longer to get approved for a high-risk merchant account, due to the in-depth underwriting process it takes. It can take as little as 24 hours to as many as five days to get approved for a high-risk merchant account. Other downsides tied to high-risk merchant accounts include higher than average processing fees, early termination fees, and longer contracts, just to name a few. 

Open Your High-Risk Merchant Account Today

Being a high-risk merchant should not be a burden. In fact, as many high-risk verticals are actually very profitable, you will be likely to find a reputable high-risk merchant account provider ready to help your business.