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.
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.