A high-risk merchant account is a merchant account provided to a business that a payment service provider perceives to be at a greater risk of chargebacks and fraud. Payment processors make this decision based on several factors. These include the nature of the business, its location, and its financial history. If you require a high-risk merchant account approval and would like to start accepting payments for any of the high-risk industries listed below, look no further.
To apply for a high-risk merchant account, you’ll initially need to fill out an online application form. To ultimately accept card payments, you’ll need to work with a reliable high-risk payment processor. Contrary to what most people believe, a high-risk account’s application and approval process can be fairly easy. SecureGlobalPay can help.
How to Increase the Chances of Your High-Risk Merchant Account Approval
Owning a high-risk business doesn’t mean that you can’t open a merchant account. Independent sales organizations, merchant account providers, and acquiring banks will always acknowledge your personal credit history. They are also interested in knowing how long you’ve been in the business, and any prior merchant accounts you’ve held with other credit card processors. Below are some tips on how you can increase your chances of a high-risk merchant service approvals.
Ensure a Positive Credit Rating
It’s crucial to remove any late payments, liens, or bankruptcies from your credit report before applying for a merchant account, especially if you are looking for instant approval. Contact a reputable credit reporting bureau to get your credit report.
Reach out to them and ask them to remove these issues from your report. Try to eliminate any bad credit to help ensure a satisfying and lasting effect on your following application process.
Be Transparent about your Prior Merchant Accounts, Judgments, Liens, or Bankruptcies
By endorsing your financial challenges, you’ll improve your credibility and overcome a few barriers to opening a new merchant account.
Be Open to Special Account Requirements or Pay Higher Fees
Occasionally, you’ll need to agree to some unique constraints or part with slightly higher fees to open a high-risk merchant account. If it makes sense, do it! It is always worth giving your clients as many non-cash payment options as possible.
Once the approved merchant account has a positive track record, you can constantly renegotiate fees and reserve requirements.
Research for a Credit Card Processor that Best Suits Your Needs
Always shop around and talk to different processors, and don’t shy away from asking questions. By doing so, you can get a better idea of the following items when inquiring on merchant services for high-risk industries:
- Discount rates
- Transaction fee
- Reserve fees
- Monthly minimum fees
- Chargeback fees
Misconceptions About High-Risk Accounts
The notion that one could get instant approval for a high-risk merchant account can be tempting at first. Numerous companies claim to provide instant approvals, but it’s vital to understand this before jumping in too deep.
The Term “High-Risk” is Absolute
Varying merchant account providers can have different underwriting guidelines. Because of this, there are some grey regions, and while one will classify your business as high-risk, another may not view it as such.
If you are not sure whether your business is classified as high-risk, it’s essential to talk to several providers and compare them while shopping around.
Your Credit Score does not Ultimately Define your Business’ Risk Designation
Some payment processors could be interested in your credit score as the business owner. However, they’re more concerned with your industry’s track record. The precise criteria for determining if a business falls under the high-risk category vary. However, the following factors are mainly used:
- High chargeback and fraud rate
- Selling heavily-regulated products and services
- Selling legally disputable products and services
- High-average ticket sales and large processing volumes
- Dubious sales and marketing strategies
- Overseas headquarters
- Everything about high-risk merchants is bad
Acquiring multiple high-risk merchant accounts helps protect your business from the ongoing risks linked to your industry. High-risk merchant service approvals provide additional leniency for fraudulent transactions and excessive chargebacks.
Payment Processors won’t immediately freeze your funds or terminate the account with these activities. Retail payment processors and payment aggregators like PayPal and Stripe will shut you down and ask questions later.
Startups Can Also be Approved
Business stability and credit card processing history are crucial in completing the high-risk merchant account application process. Startups typically lack these traits, but that doesn’t necessarily mean they can’t accept credit card payments. Startups are classified as high-risk and can therefore acquire a high-risk merchant account and be approved.
Being a High-Risk Merchant is Not Permanent
Policies and agreements regarding an industry’s risk classification can change over time. While one cannot control all the factors making a business high-risk, one can do a few things. These include minimizing the chargeback rate to get better financial records with the providers in the future. In addition, operating in safe areas such as the European Union and North America and accepting a single currency are a few tips to gain favor with future providers.
What is Instant Approval?
In reality, there’s no such thing as a legitimate instant approval for any form of high-risk merchant services account. It takes much longer to get the final approval for a high-risk merchant account compared to low-risk businesses.
High-risk merchant accounts usually require a minimum of three days to be approved. This is not an instant approval, but it is as fast as it will get. The approval of a high-risk business needs a lot of extensive research into the credit history, location, dealings, and business owners. You’ll always be required to submit more documents and wait longer for the underwriting processes than a low-risk business model.
All high-risk industries merchant accounts must undergo a rigorous compliance check before being approved for a high-risk merchant account. By using the services of a reputable payment service provider, you’ll be on your way to getting your high-risk merchant account approved, payment gateway integrated, and accepting online payments sooner than you think.