What Types of Businesses Are Considered High-Risk for Merchant Accounts?

Because of the increasing popularity of e-commerce transactions around the world, opening a merchant account for your company is a must-have investment. In contrast, high-risk firms are more likely to experience chargebacks, and as a result, they tend to have higher merchant processing fees than other businesses.

Enterprises in the adult industry, the travel industry, financial services, the gaming industry, and companies that sell software downloads are examples of businesses that are deemed high risk. Each merchant, on the other hand, has its own set of standards for evaluating whether businesses are considered high risk.

Factors that influence the classification of a business as high-risk

Generalized speaking, businesses with a chargeback rate of one percent or greater of their entire transactions can be considered high risk. Other considerations may include your company's processing history, location, and the products that you provide. The following are some of the additional characteristics of high-risk businesses:

The fact that your company sells to customers in the United States but is headquartered elsewhere may cause you to be classified as a high-risk enterprise.

Selling products that are subject to stringent regulations: If you plan to sell drugs or adult materials, you may need to obtain a high-risk merchant account from a financial institution.

High processing volume: Companies with a greater monthly sales volume than the national average are more likely to be categorized as high risk businesses.

People who work in the telemarketing industry or who engage in multi-level marketing are more likely to be identified as high-risk customers.

Sales of large numbers of tickets: Businesses that offer high-value items such as jewels and antiques are sometimes seen as high-risk enterprises.

Insufficient credit history: Businesses with little or no credit card processing experience are more likely to be categorized as high-risk enterprises.

If you match the requirements outlined above and are classified as high-risk by your merchant service provider, you still have a plethora of options for merchant service providers with whom to do business. You'll be able to reduce risk by keeping your chargeback rate as low as possible and ensuring that your processing is PCI-compliant.

With this advice, you'll learn more about how to select the best high-risk merchant processor for your business.

Who Is a Candidate for a High-Risk Merchant Account?

It is necessary for a business to have a merchant account in order to accept credit card payments from customers. As a merchant, you have two options for obtaining a merchant account: through a bank or through a third-party service provider. For online retailers, the most common and, in most circumstances, most cost-effective source is a third-party merchant account provider, which can be found on the internet.

Compared to a 'typical' goods/services firm, high-risk merchant accounts are required by organizations that face a higher risk of the following events occurring:

• Bankruptcy

• Transactions that are fraudulent

• Sales volume is really high.

• Refunds are issued at a high rate.

• Charge-backs are occurring at an alarming rate.

Other factors that may lead to a merchant being classified as high risk include:

Merchants' Geographical Location - Some merchant account providers will not allow merchants from specific geographical areas.

In some areas, the product or service that the merchant is selling is unlawful.

Merchant Credit History - Some providers will not allow merchants who have a bad credit history or no credit history at all, for various reasons.

A merchant account for persons working in a high-risk industry is unlikely to be approved by most banks because of the high level of risk involved (such as adult entertainment, replica goods, pharmacy etc). Due to these considerations, several third-party service providers offer their products and services to both general and high-risk merchants.

A higher level of fraud protection will be provided by merchant account providers that have been created to handle High Risk Merchant Accounts in order to reduce the costs that their merchants experience. In order to compensate for the increased level of risk, rates for high-risk merchant accounts will always be higher than those for lower-risk accounts. Visit our website for more details.

When searching for a high-risk merchant account, there are a number of considerations that should be taken into consideration. One of the most essential considerations will be rates, which will include costs for refunds and charge-backs, as well as transaction fees, the discount rate, and recurring fees. After that, you'll want to consider about fraud protection, customer support, and reporting options that are available to you as a merchant.