What You Need To Know About High-Risk Merchant Accounts
It can be a big let down, frustration, or even deterrent to customers when they find out you are a cash-only business, especially if they want to buy something with no cash on hand.
While it’s standard practice to accept electronic payment these days, perhaps your business is considered high-risk, which is the reason why you don’t offer electronic payment. Find out if you are high risk, and what you need to know about high-risk merchant accounts.
High-Risk Merchant Accounts Defined
It is typically a business or industry that is notorious for fraud, chargebacks, sitting at the edge of legality, or considered risky.
High-Risk Merchant Considerations
When you apply for a merchant account here is what is taken into consideration.
- Number of Years in business
- Merchant Account History
- Company Financials
- Personal Credit History
- Type of Business
- High Ticket /High Volume Amounts
- Pharmaceuticals
- Over Seas Business
- Gaming Industry
- Firearms
- Lodging and Travel
- Network Marketing
- Adult Entertainment
- Card Not Present (CNP) transactions (Mail Order, Over The Phone, etc.)
Keep These Things in Mind If You Are High-Risk
First off, it’s ok. You are still likely be able to obtain a merchant account. There are merchants who specialize in providing accounts for businesses like yours.
Keep in mind that you will pay higher fees per transaction. For example, when you go to accept credit cards as payment, you will be paying interchange fees to use your merchant’s network and processing fees. You will also pay fees to connect the card-issuing bank to the acquiring bank. Since these merchants will be taking on what they believe is a “high risk” with you, they will want to minimize their risk by adding on higher premiums.
You may also be asked to keep a reserve like a rolling, up-front, or capped/fixed reserve.
Lastly, because of the higher risks involved with your business, you may be susceptible to an account freeze/hold. This means you will not be able to process any electronic payments till the freeze/hold is lifted. Suspicious activity within your merchant account is one trigger. Another one could be temporary while the payment processer analyzes your processing habits to decide if you are still compliant within the terms of agreement.
Whether your account qualifications are less than remarkable, or your type of business is labeled high-risk automatically, you can still move forward with a profitable business. In the meantime, have you considered an upgrade or possibly a new Point-of-Sale (POS) system? Give Bepoz a call for a free demo today!