Accepting credit card payments is a necessity for most modern businesses. However, identifying the best merchant account provider is often an arduous process, especially for merchant accounts that are considered to be “high risk.”
It’s unsurprising because “more risk” generally comes with higher fees, especially when it comes to chargebacks. That’s why we wanted to give you a rundown of everything you need to know about high-risk merchant accounts.
Here are the three main things you should know about high-risk merchant accounts:
1. What is a high-risk merchant account?
A high-risk merchant account refers to an organization or business that is more likely to experience fraud or frequent chargebacks due to the goods or services it provides. High-risk merchant accounts typically have higher processing fees to compensate for the risk the payment processor takes on while working with the account.
These charges will be higher than fees applied to low-risk business transactions, sometimes even more than twice the payment processing fee applied to a low-risk merchant account. High-risk merchants also may be required to pay higher chargeback fees.
Types of High-Risk Merchants
What kind of merchants are considered high risk? Several merchants fall into this category, including those that:
- Experience frequent chargebacks due to product returns, customer dissatisfaction, or failure to provide a service.
- Have a negative reputation within a particular field.
- Have a poor credit score or little-to-no credit history.
- Are in industries with high volatility.
- Belong to a trend-based industry that may only be profitable for a short period.
- Haven’t dealt with credit or debit card payments in the past.
- Have a new business that is just getting started.
- Deal with international payments from various countries.
- Offer services and products in a highly-regulated industry.
- Have a high number of transactions or have high average transaction rates, including organizations that process more than $20,000 of payments a month or report average transactions of at least $500 or more.
2. What are some examples of high-risk industries?
High-risk merchants usually fall under specific industries. High-risk industries include:
- Pawnshops
- Online dating
- Gambling or sports betting
- E-cigarettes and vaping
- Debt collection services
- Subscription-based services
- The travel industry
- Sellers of health and wellness products, such as medical cannabis or CBD products and vitamins or supplements that make certain claims
- Highly-regulated industries, such as adult entertainment
Different, More Stringent Requirements for High-risk Merchants
In addition to paying higher payment processing and chargeback fees, high-risk merchants may be required to meet certain standards. Often, this means longer contract terms that are subject to additional charges if the contract is terminated early. Additionally, high-risk merchants often have to pay monthly or annual fees.
Then there’s a rolling reserve, which is a sub-account that is linked to a merchant services account and part of a merchant services provider’s contract. A portion of an organization’s credit card sales is held in the sub-account to cover potential chargebacks.
3. Can a high-risk merchant account protect your business?
What can high-risk merchants do to protect their businesses and make life easier? Open a high-risk merchant account. High-risk merchant accounts offer protection for businesses, including chargeback protection, a wider array of payment options for customers in national or international locations and the ability to offer more products.
This means engaging with a high-risk payment processing vendor. They work with you to find the best solutions to meet your high-risk needs while providing you and your customers with convenient credit and debit card transactions.
Find out what a high-risk payment processing account can do for your business.
All payment processing involves some level of risk, from data-security-related issues to customer returns. Although risk is everywhere, all risks are not equal, and not all payment processors offer the same level of risk tolerance. National Processing knows how to work with clients in high-risk industries, offering simple, transparent and cost-effective solutions. A high-risk merchant account with National Processing helps you simplify your payment complexities so you can focus on growing your business.
It’s time to make payments easier. Contact us today to learn more.
