Understanding High-Risk Merchant Accounts: Here Are 4 Ways

Oct 26, 2021

Launching a new business is a great undertaking with plenty of challenges on the journey to success. If you are looking to set up an online business, there are more complexities that you must be aware of. 

Since the only way to get paid online is via a credit or debit card, then you will need a merchant account to process these payments safely and efficiently. Traditionally, you should be able to approach your local bank or even your credit card company to take care of that, however, if you are a high-risk merchant, this is simply not an option. 

What Is A High-Risk Merchant?

A high-risk merchant doesn’t necessarily have to be running an illegal operation to be labeled “high risk”. It actually covers much more than that. Both acquiring banks and payment providers have their own specific criteria for what they consider to be a high-risk business. Two of the most common reasons that would classify a business as high risk include a risk for fraud that is higher than average as well as chargebacks. 

Again, every provider has different criteria that help them determine whether a business is high risk or not. What one provider might view as a risky venture might not faze another provider. However, there are standards that they follow to make that determination. Some of them include:

  • High volume: If the volume of your transactions is very high, it increases your risk for bad actors to steal customers’ credit information.
  • History of excessive chargebacks
  • Accepting multiple currencies
  • Based in/sell in the high-risk region (Outside the US, Canada, Australia, or Japan)
  • Offering subscription or recurring payments

Examples Of High-Risk Industries

Sometimes, the industry itself is plagued by issues such as chargebacks, returns, or fraud, increasing financial risk for the providers. Here are just some of the verticals that providers would rather not do business with:

  • Cryptocurrency
  • Adult entertainment and dating services
  • Casinos for online gaming
  • Prepaid debit cards
  • Pharmaceuticals and online drug providers
  • Tobacco/E-cigarettes/cannabis products
  • Telemarketing sales
  • Airlines, accommodations, and ticketing agents
  • Subscription services (magazines, collectibles, etc.)
  • Financial counseling/credit repair/debt reduction
  • Timeshares

What To Expect When Seeking A High-Risk Merchant Account Provider?

High-risk merchants do not need to fret that they will be left out of the payment space completely. On the contrary, there are plenty of good, reputable high-risk merchant account providers who specialize in the aforementioned verticals and are willing to help.

However, the real and present risks do have some negative implications that the merchant must be well aware of…the higher costs associated with processing payments. In fact, high-risk merchants are known to pay up to 1% to 2% more for every transaction compared to their lower-risk counterparts. Here are more terms and conditions to be aware of:

  • Higher Chargeback Fees 
  • Tiered Pricing
  • Longer Contracts
  • Automatic Renewal Clause
  • Early termination Fees
  • Liquidated Damages Clause
  • Rolling Reserves

Before You Apply For A High-Risk Merchant Account

There are plenty of high-risk merchant account providers on the market, however, not all are created equal. As you read through contracts, ensure that all fees are clearly stated. The provider must be based in a reputable country. The acquiring bank must also be firmly established. Their payment gateway must be well-equipped with the latest PCI Level 1 Compliance. Do ask about their chargeback mitigation tools and resources. Finally, a reputable provider must also have solid anti-fraud solutions.

Stay Vigilant

Just because you are prepared to pay more doesn’t mean you should be swindled out of your hard-earned money. Take the time to research and evaluate all available options. Most importantly, read your contract. Your ability to accept credit card payments should never attack your bottom line.

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

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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.