Launching and operating a business can be an all-consuming endeavor. A considerable amount of time, capital, and strategy is essential. Among the plethora of requirements to start and sustain a business, there is one inescapable event that rattles even the most seasoned entrepreneur…risk.
The conventional risk associated with businesses usually refer to the possibility of falling short of profit goals, increased competition, and governmental regulations. These are part and parcel of running a business.
Then there are risks associated with running a booming, highly lucrative venture. These types of businesses are more likely to expose the merchant to a different type of risk, the risk for fraud and chargebacks.
What Are High Risk Merchant Accounts?
Merchants who operate businesses where there are higher than normal chargebacks and fraud, conduct their business from a specific location, or simply sell services and products that could be labeled as legally questionable, tend to be labelled high risk by traditional payment processors.
Traditional payment processors are well aware that taking on high risk merchants as clients would be detrimental to their bottom line as they would be on the hook for financial losses and a damaged reputation.
Once a merchant has received the designation as a high risk business, they are advised to seek a high risk merchant account from a reputable high risk merchant account provider.
A high risk merchant account is a distinct payment processing account that can accept both debit and credit card transactions. The downside to opening up a high risk merchant account is the considerably higher fees to process these payments. In fact, high risk merchants can expect to pay up to 1% to 2% more for every transaction as opposed to low risk merchants.
Additionally, high risk merchants will find that they will be offered longer contracts, tiered pricing, chargeback fees, automatic renewal clauses, early termination fees and so much more.
High risk merchants are well advised to study their contracts carefully, even consult with a lawyer to review the contract before they sign it. This will ensure that the agreement will be favorable for both the merchant and the payment provider.
Choosing A High Risk Merchant Account Provider
High risk merchant account providers may find themselves in what seems like a high risk payment processing “no man’s land”, as many traditional payment providers will not work with them. However, they must resist the temptation to settle on just anybody and exercise extreme scrutiny when seeking a reputable high risk merchant provider.
It is well advised to avoid high risk offshore merchant accounts since they can mean great personal and financial risk should an unsuitable processor be chosen.
Research can not be emphasized enough as there are many unscrupulous processors ready to make bold claims about their experience in the high risk industry when this is truly not the case. Check their reputation, reviews, and ask for referrals. As mentioned before, read the contract carefully and have legal professional help to scan for any problematic clauses.
Being labeled as a high risk merchant is not the end of the world and it certainly doesn’t mean a death sentence to your business. On the contrary, many high risk businesses are enjoying the benefits of processing their payments securely with high risk merchant account providers that truly have the expertise to move businesses forward.
Once you have secured a high risk merchant account with a trustworthy provider, treat the relationship as a partnership. Ensure that you are doing everything you can to keep your chargebacks low (usually lower than 1%) to avoid fees and account closure.
Follow the terms of your contract. This will make sure that your business has the backing it needs to operate successfully for many years to come.