- 1 What’s A High-Risk Merchant Bank Account?
- 2 High-Risk Vs. Low-Risk Merchant Accounts
- 3 The Need For High-risk Merchant Processor Services
- 4 High-Risk Merchant Account Fees
- 5 Things To Consider When Choosing a High-Risk Merchant Processor Provider
- 6 How To Get A High-Risk Merchant Account?
- 7 Conclusion
When searching for a high-risk merchant account processor service, you must select a company with the right experience and reputation to meet your business’s needs. Further, there are many merchant service providers in the market, and each one has its key features.
Moreover, it doesn’t matter if you want to sell CBD online or search for a payment gateway on your adult website. You must find a trusted high-risk merchant processor in your industry. Before moving into the things to consider concerning a high-risk merchant processor, let’s look at the basics.
What’s A High-Risk Merchant Bank Account?
High-risk merchant accounts are payment processing accounts for high-risk businesses. High-risk businesses are more likely to be chargebacks, and hence, they require merchant services at a higher price.
The banks may put a rolling reserve on an account if a business has a high risk of chargebacks or a history that shows many chargebacks. This reserve is the money that can cover any chargebacks or fraud.
High-Risk Vs. Low-Risk Merchant Accounts
Merchant account providers use their criteria to categorize businesses relying on their risk. However, there are many characteristics that both types of merchants share. It is crucial to determine whether you are a high-risk merchant account before applying for a high-risk merchant processor.
Understanding low-risk merchant accounts
While each high-risk merchant processor may have its guidelines, all players have common characteristics.
These are some general indicators for merchants at low risk. However, there are many more factors based on compliance’s overall evaluation.
- Monthly processing costs less than $20,000
- The average credit card transaction is below $500
- A merchant’s industry of business is low-risk. These include, for example, clothing and shoes, baby products, household goods, etc.
- Zero to low chargeback ratio
- The country in which a company operates is considered low-risk (European Union countries, Canada, USA, Australia, Japan).
- Minimized returns
Understanding high-risk merchant accounts
A business’s risk is higher and may need a high-risk merchant processor if it has more chargebacks. The leading aspects are industry prominence and past processing record (it is advisable to maintain your chargeback percentage below 0.9% of aggregate transactions).
These are the general characteristics of high-risk merchants. However, they may differ based on the guidelines of a certain high-risk merchant processor.
- Monthly sales volume of more than $20,000
- Average credit card transaction greater than $500
- A company sells products or services to countries identified as having high levels of fraud.
- Excessive chargebacks and bad credit history
The Need For High-risk Merchant Processor Services
Before approaching a high-risk merchant processor account, first, understand if your industry falls under the category of high-risk merchant.
The travel industry is an example of a high-risk business, and hence the industry requires high-risk merchant processor services. Many factors could cause cancellations, and customers who file chargebacks or request refunds are common.
Other industries requiring high-risk merchant account processors include gambling, forex trading, and adult sites.
Many other business models and industries are also susceptible to chargebacks. Here’s a list of the most common high-risk businesses requiring high-risk merchant accounts.
Moreover, it is helpful to plan if your industry is high-risk. The industries are:
- Adult industry
- Travel planning, including cruises, airlines, and vacation planners
- Furniture and electronic shops
- Multi Level Marketing (MLM)
- Online dating
- Vape shops, CBD, and e-cigarettes
- Subscriber services and companies that offer recurring payments
- Collection of debt
High-Risk Merchant Account Fees
High-risk merchant account costs are more expensive than accounts for low-risk businesses regarding fees. Moreover, these are unavoidable costs, and you should expect to pay higher processing fees and account fees.
You can now find a high-risk merchant processor who offers competitive rates tailored to your company’s needs. There is no need to remain in long-term contracts with the high-risk merchant processor lasting three to five years, which is true for additional costs.
Further, a high-risk merchant processor may charge a setup fee, monthly or yearly fee, or even an additional PCI fee. Please ensure you read the contract with the high-risk merchant processor you select for opening your account.
Things To Consider When Choosing a High-Risk Merchant Processor Provider
You can find several high-risk merchant processors on the market. So, do your research before choosing your payment partner. Before making a final decision, there are several things you need to consider. They are as follows:
Responsive support by the high-risk merchant processor
The high-risk merchant processor should assure you that someone is available to assist you if something goes wrong with your in-app or website payments. High-risk businesses should have a credit card payment provider that guarantees that all issues will be resolved.
If you have a complex business model, you should look for a high-risk merchant processor that allows you to implement different payment scenarios. Further, you should be able to customize each element of the payment form, and you should be able to discuss the rates, conditions, and features that are most relevant to your business.
The high-risk merchant processor’s website should clearly explain the pricing structure. You can locate detailed information about fees and any additional costs. Be sure to confirm that there are no hidden fees.
The technology offered by the high-risk merchant processor
You might be curious to know if your potential payment gateway offers multiple accounts. Ask your high-risk merchant processor provider about the APIs of the payment platform so you can have complete control over the payment setup and process.
Further, it is essential to have quick onboarding and that payments are designed for users. Moreover, avoid payment processors that use legacy technology or lack know-how.
The business model accepted by the high-risk merchant processor.
Check that the high-risk merchant processor you consider is compatible with your industry before submitting a high-risk merchant account request. Moreover, this is true for all countries. A reliable high-risk merchant processor will keep a list of countries and business models they support on their websites.
Take the time to read their contract.
You won’t usually find a sample contract online. However, if you do get a copy of the terms and conditions of the high-risk merchant processor, make sure you read them carefully.
How To Get A High-Risk Merchant Account?
You must submit tax and business documents when applying for a merchant bank account. After successfully processing the application, your high-risk merchant processor will determine if you are a high or low-risk merchant and adjust their plan accordingly.
Certain payment processors are better suited to high-risk clients. It’s worth researching different providers to find the one that best suits your needs.
Choosing a high-risk merchant account is not easy, but it’s worth the extra time and money. Further, it’s also important to choose a provider that offers a wide range of services. The services may be more costly than the standard ones, so choose carefully. Further, don’t forget to ask about extra features.