Understanding High Risk Merchant Accounts and How You Can Benefit From Having One

Oct 12, 2020

The phrase high-risk is a scary prefix for most business owners seeking a merchant account.

It often means tougher-than-usual terms and higher fees than low-risk accounts.

Banks won’t onboard any business category that poses a high financial and reputational risk.

So, in a nutshell, underwriters will consider your business risky if they notice something they don’t like about it. This post will discuss some of the things that scare many banks away from merchants. 

Reasons Bank may Consider Your Risky

Below are the most common reasons for a risky categorization;

  • Too many chargebacks. Reverse charges requested by disgruntled customers can ruin your bottom line because you take all the liability. Accumulating excess chargebacks per-month can make your company a no-go-zone for banking institutions.
  • High-fraud risks. You’ll be classified high-risk if your sector is prone to payment fraud risks, e.g., if you initiate Card-not-present transactions.
  • Trading restricted products. Dealing in highly-restricted products or sectors like Marijuana, adult entertainment, and e-cigarettes makes you high-risk because you’re prone to act out of compliance.
  • High Ticket Sales. If you receive a massive amount for every sale you make, then chargebacks can be expensive. Banks are often unwilling to welcome such huge risks. 
  • You run an overseas company. Running an offshore business increases risk factors because banks can’t guarantee your full adherence to laws.
  • Bad Personal Credit. Undesirable credit can also lead to a high-risk-merchant-account classification.
  • Risky by Association. Businesses that rely on multilevel marketing are often linked with the much-hated pyramid schemes and categorized as high-risk.

Companies that fall in this group must search in the right place to enjoy the best merchant account offers.

Getting a High-Risk Merchant Account 

A payment company that poses a high-risk merchant account provider is your best bet if you end up with a risky classification for whatever reason.

These companies work with financial partners who understand your industry’s risk profile and are more likely to accept you.

High-risk merchant account providers have come to rescue risky businesses that otherwise would not have access to standard merchant account solutions.

But these merchant services are costlier than regular offers; however, that’s understandable given the risks they welcome by onboarding your firm.

Application procedures and requirements aren’t different than with low-risk merchant accounts, but underwriting is stricter to ensure only eligible candidates qualify.

Final Words

It’s important to understand high-risk accounts before applying for one. Merchants must dig further into the details and compare rates to get the best offer.

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

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.

Live Chat