A high-risk merchant account is an account that is vulnerable to fraud and chargebacks. Payment processing companies arrive at this conclusion after looking at a number of factors which include the nature of business and financial history. A business that requires a high-risk merchant account and high-risk credit card processing service attracts plenty of risks.
Being a high-risk merchant can mean many things for your business type but the most important aspect of all is whether it can accept and process credit and debit card transactions.
Many low-risk payment processors refrain from working with these types of businesses and those that do, charge expensive fees, hold funds, and have lengthy payout times because of the risks involved.
These are not the appropriate providers to provide high-risk merchant services for you long-term because they can unexpectedly interrupt your services or close your account at any time without telling you first.
A high-risk merchant account and high-risk credit card processing are crucial to the survival of any higher-risk business that has been turned down by traditional financial institutions.
The way forward is to have the right information.
With the right information, a high-risk merchant can make better decisions and find the appropriate credit card processor offering high-risk credit card processing services.
Reasons Why Underwriters See Your Business as High-Risk
A business can be seen as high risk for many reasons, but these are the major red flags:
- High chargeback ratios
- Excessive fraud
- Doing business in designated “high risk” countries
- Selling contraband products and illegal services
- Poor financial credit score
- Questionable sales and bad marketing practices
- The average credit card transaction is over $500
- Average monthly sales volume over $20,000
- Operates an offshore company
- Acceptance of multiple currencies
- Subscription payment requirements (recurring billing)
- Placed on MATCH List
This is not an exhaustive list. Different payment processors have different standards in regards to what they see as “high risk”.
However, all of them will definitely have a problem providing merchant account services to you, if you fall short in any of the aforementioned areas.
What Do You Do If You Are Considered a High-Risk Merchant?
Research: Never take the word of any agent offering these services at face value. Check out their websites and customer reviews. A static-looking website and poor customer reviews are a tip-off about the type of service you should expect.
Speak the Truth: Do not misrepresent yourself because you are having a hard time getting a high-risk merchant account.
Dishonest merchants will eventually be discovered and placed in the dreaded Terminated Merchant File (TMF). If you end up on that list, you may struggle to get a merchant account in the future.
Improve Credit Score: Never make a late payment. Increase your credit limit and catch up with past-due payments.
Get a secure debit card and always check your credit report for errors and get them removed as soon as you find them. The higher your score, the less of a risk you pose to payment processors.
Manage Chargebacks: Work to whittle down your chargebacks by reviewing reason codes and chargeback statements. Respond quickly when they crop up and find ways to keep future ones from happening.
Get expert help to scrutinize your payment process and proffer areas of improvement if required.
When payment processors tag you as a high-risk business, high-risk credit card processing can become a struggle, if you do not keep these practices in mind.
These tips improve your chances of getting a high-risk merchant account with high-risk credit card payment processing possibilities.
Applying for a Merchant Account
When applying for a regular merchant account, the merchant is expected to provide business and personal information and possibly a credit check.
If anything in that application raises a red flag that the business poses a high risk, the application is turned down or slammed with high rates or fees.
To get a high-risk merchant account for high-risk credit card processing, you need to fill out an online application first.
If you use SecureGlobalPay as your payment partner, the process is short and simple.
From there, we will assist you and help you find a bank well-suited to your business goals. After approval by the acquiring bank, you get an all-clear for online high-risk credit card payment processing.
Requirements for a High-Risk Merchant Account
- Incorporation certificate
- Organizational structure chart of shareholders
- Shareholder certificates
- Processing history of prior 6 months (including overall volume, chargeback percentage, and number of transactions)
- Copies of passport and utility bill of business owner
- Copies of passport and utility bill of directors and shareholders with over 15%
Web Requirements for a High-Risk Merchant Account
- Display name of the business
- Return, refund, and cancelation policies must be listed on the website
- Safe and secure payment order page
- Placement of accepted credit card brand logos
- Customer service phone number and email address
- Provide test user details to access the platform
Risk management experts have the final say in determining if your business is a good fit for high-risk merchant accounts and high-risk credit card processing.
They will also check if your business is on the Terminated Merchant File List and thoroughly review your credit card processing history.
If your history shows too many traces of fraud, chargebacks, or that you lost a previous account, this dims your chances of getting a high-risk merchant account.
Payment processors handle each evaluation on a case-by-case approach. So, there might be other factors that they use in concluding if you truly deserve a merchant account that can handle high-risk credit card payment processing.
High-Risk Credit Card Processing: What to Expect
High-risk merchant accounts and high-risk credit card processing attract higher fees than low-risk merchant accounts.
According to Ascent, very high-risk merchants pay 1%-2% more on average than low-risk merchants. However, there are additional fees, charges, and limitations that come with operating a high-risk merchant account.
Here are some of them:
- Higher account fees
- Setup fees
- Premature termination fees
- Rolling reserve
- Transaction limits
- Chargeback fees
Always read the fine print of your contract to know the penalties and fees that come with your account. In addition, have assurances that your processing fees will be reduced down the line.
Ideally, the advantages of high-risk merchant account processing payments outweigh the costs that you may incur.
However, this does not mean that you should get scammed in the process. Be wary of payment processors looking to cash in on your desperation.
Always evaluate your options carefully and understand the terms and conditions before signing anything.
The bad news is that mainstream payment processors stay away from high-risk business categories when there is too much risk involved.
However, the good news is that quite a number of reputable high-risk payment providers have no qualms about doing business with you.
With new technology, these high-risk payment processing providers offer adaptable solutions for high-risk industries that are not expensive.
Benefits of a High-Risk Credit Card Processing Account
More Advanced Payment Acceptance Options – Low-risk merchants are restricted to the types of revenue they can generate with credit cards.
High-risk category merchants are not hemmed in by these limitations.
- Process higher sales volume i.e., special promotional campaigns and launch dates
- Offer subscription payments
- Sell an array of products and services
Able to Conduct Business Internationally – Low-risk businesses are limited when it comes to doing business across geographical borders.
High-risk merchants have free rein when it comes to expanding their businesses into other regions and countries.
Better Security – All high-risk merchant account companies offering high-risk credit processing services require top-tier security certifications to be in business.
These technological parameters provide a better covering for sensitive card information than the security measures found in low-risk businesses.
Choosing a High-Risk Merchant Account Provider
Industry Experience. Make sure the payment provider has experience working with business models in your industry.
Iron-Clad Security. Chargebacks and fraud are commonplace for multiple types of high-risk businesses. Confirm if there is an unfailing and multi-layered chargeback system in place.
AI-based checks, real-time notifications, and anti-fraud tools are also mandatory.
Adaptability. Choose a high-risk merchant account provider that allows you to alter your payment scenarios as the need arises. Discuss rates, fees, and business conditions.
Find out if available features are tailored to help your business succeed.
Experience. How long has the high-risk credit card payment provider been around? What experience do they have in handling high-risk merchant accounts like yours?
These relevant questions help determine if your business will be around in the long term.
Technology. Does the high-risk payment provider allow multiple merchant accounts? Is it possible to customize your payment order page? Do they also provide ACH payment services? Do you have 100% control of your setup and payment process?
Quick onboarding and user-friendliness without interruptions are also non-negotiable.
Service Value. Select a provider that knows the importance of customer service. 24/7 support, training, troubleshooting, and maintenance are important to the sustainability of your business.
When you are having issues with accepting credit card payments on your website, responsive support is vital.
No Lengthy Contracts. Do not choose a company that offers you a long-term contract. Many high-risk merchant account service providers lock merchants in lengthy contracts with an automatic renewal clause and early termination fee.
Steer clear of ETFs by asking for the contract length and if there are any clauses that can cause you to stick around longer than necessary.
Clear Pricing. Choosing a payment processor provider with transparent pricing is a good decision.
The pricing should always be listed on the acquiring bank application or readily provided when you ask for it. After this reveal, there should be no further surprises or hidden charges. If the information you are asking for falls short or is incomplete, keep it moving to the next one.