If you’re wondering what a high risk merchant account is, it’s likely that you are searching for credit card processing services for your small business. And you may have been told by a processor that your business falls into a high-risk niche.
Anyway, don’t take it personally. Some businesses are automatically labeled “high-risk” by merchant account providers simply based upon their specific product and service offerings.
Over time some industries have proven to have higher credit card chargeback rates by customers, and/or higher risks of fraudulent transactions. Guilty by association, these characteristics give some merchants a riskier profile. This has especially been the case with online services, especially for non-tangible goods, such as credit card processing for tech support or online dating.
In some other industries it’s relatively obvious why a business may be considered risky and require high risk merchant services. These businesses include: adult services, dietary & nutritional supplement retailers, online gambling sites and debt collection services.
And some businesses are considered risky for no apparent reason, other than the processing underwriter’s say so. For example, despite some e-cigarettes not being a tobacco product, electronic cigarettes fall victim to this classification.
In addition, the physical location of a business can automatically cause a business to be high risk. This is the case with many businesses located outside the United States.
Additionally, if you’re just starting your business and have no credit card processing history or have poor credit, a high risk merchant account may be required. You will likely find it more challenging to get approved and the underwriting process can take longer.
High risk merchant accounts will always carry slightly higher rates. When shopping for a merchant account provider, you should get multiple offers. And be sure to read all the fine print. What seems like the best rate may actually have stipulations or hidden fees that make it a less favorable option to the merchant.
Do you your homework and make some phone calls. You’ll find that there are plenty of credit card processors that work with high risk businesses. In fact, some are so good at setting up high risk merchant accounts that they are considered specialists.
So, if or when a merchant account provider says “sorry we don’t work with high risk merchants”, keep your head up and make the next call. There are credit card processing companies that will be glad to help!
Have questions? Give us a call at The Transaction Group. We’d be happy to steer you in the right direction!