In order to evaluate whether or not you qualify for a merchant account, suppliers and banks use a series of criteria to assess your risk level. Paying greater fees may be necessary for High Risk Merchant Accounts since they are more vulnerable to payment frauds and chargebacks.
In order to identify the most cost-effective payment processor for your business, you should look into a variety of possibilities because there is no definitive list of what constitutes a High Risk Merchant Account. Some suppliers may be more tolerant to risk and give more competitive rates than others.
Identifying Signs of a High Risk Merchant Account
To evaluate if you could be labeled a high-risk firm or not, here are some indications you should look for:
If a client files a chargeback or payment dispute, the payment processor will be required to intervene in the reversal of the payments. For high-risk businesses who have a higher chargeback rate of 1-2 percent , this might lead to increased costs.
Overseas location: If a firm sells to consumers based in the United States but has headquarters abroad, discrepancies in international banking rules might pose a challenge for merchant services. This means that international enterprises could be branded as high-risk.
If a company owner's personal credit score is low, the payment processors may view them as a High Risk Merchant Account, which might lead to their account being closed off.
High-risk industry: Depending on your merchant category code you may be categorized as high risk owing to volatility or changing rules. This can include e-commerce enterprises and those in the adult sector.
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If you are branded as a High Risk Merchant Account by a payment processor, you may still be able to negotiate advertised charges to make them more affordable. Many High Risk Merchant Account accounts come with a range of essential services including payment encryption, multi-currency compatibility, and more.
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