A high-risk merchant account is a merchant account designed for businesses deemed as high-risk businesses or operating in high-risk industries. Such a business might include; betting or gambling businesses, adult entertainment businesses, bail bonds, auto rentals, collection agencies, businesses offering subscription services, and those in the medical marijuana market. Multilevel marketing and many other such businesses where the customer is not physically present. Such businesses find it hard to get financial services directly through financial institutions thereby requiring high-risk merchant services. High-risk merchant services are provided specifically by companies tailored to offering those services but at an extra fee.
Are You A High-Risk Merchant?
Believe it or not, there’s no single definition of high-risk businesses in credit card processing. Visa, Mastercard, American Express, and Discover all have their own lists. Processors use those lists as a base and add additional industries according to their own risk requirements. That means that while all processors will include the card brands’ listed industries, any additional high-risk classifications beyond that are at the processor’s discretion and will vary from one processor to another.
High risk of credit card processing can be difficult, but it is not a death sentence for your business. Running any business nowadays give or take demands that you give your clients the option to pay with credit or debit card. In case you are an e-commerce entrepreneur, credit/debit cards are about the only option for getting paid. Although tiny businesses may get by with a payment service provider like PayPal or Square, once your company reaches a particular size, you are going to need to upgrade to a full-service merchant account. While it’d be fine if credit card processors treated all businesses equally, but the truth is they don’t.
Larger, higher volume businesses receive lower processing rates and frequently obtain more generous contract terms. Businesses can also be treated differently based on the degree of financial risk they present to their processor. All processors will carefully judge your business to determine if you fall in the list of a high-risk merchant class. If for whatever reason, your company is determined to be from the list of the high-risk merchant class, the implications can be severe. Many high-risk merchant processors will simply refuse to approve you for a merchant account, while others will charge you significantly higher rates and fees than you’d otherwise have to pay. Sadly, there is also a good deal of merchant services providers that intentionally market to high-risk businesses which are fighting to get approved for a merchant account, just to rip them off with exceptionally high fees and rates, along with draconian contract terms.
If you’re considering a particular provider, check their website or contact them directly to see if they find your business to be high-risk and needs a high-risk payment processor. This can save you a lot of time and effort to find a high-risk international merchant account in wasted applications to providers who aren’t going to approve you. How a merchant services provider treats a high-risk business for credit card processing can also vary widely. Many providers, particularly those that try to offer merchant services at the lowest possible prices, simply do not accept any high-risk businesses at all. This helps to reduce their exposure to fraud and keeps costs low for their existing clients who use high-risk merchant account credit card processing. Other providers will allow certain high-risk companies but will charge you significantly higher rates and fees for your merchant account due to the elevated risk they’re accepting by giving you a merchant account. There’s also a third category of providers who specialize in placing high-risk businesses. While their rates and fees aren’t a good deal for non-high-risk merchants, they can often provide a merchant account for high-risk businesses that have been turned down by other providers.
Every business that applies for a merchant account is assessed for the level of risk that their business experiences. The level of risk has a dramatic effect on the processing rate that is offered to the business and is usually centered around the number of chargebacks that business receives offset by the volume merchants process each month. Chargeback prevention can go a long way towards helping you keep your chargeback rate much lower.
Accepting payments through credit cards has been part of the norm of modern business but if your business falls under the high-risk category, finding a Best high-risk merchant account provider can be challenging. Is it very important to get the right merchant account provider that will suit the business’ needs because a high-risk business requires special attention in setting up a payment processing account because of the heightened risk that comes with the industry category of the business itself?
It is a must to find a reputable high-risk merchant account provider that will process the credit card transactions of the business.
You can find a list of high-risk merchants on various merchant account comparison websites. These high-risk merchant lists may contain high street banks and various PSPs, payment facilitator, MSPs and ISOs.To find the perfect partner for your business out of these list of high-risk merchant account provider is a tricky task. You need to check the rates and the terms of every provider out of this list of Merchant account provider and then find the best terms according to your business. For card not present transactions, finding a high-risk merchant account is even more difficult. It is recommended to start the search for such a company online. It is possible to find a lot of information on the internet nowadays. From the internet, a list of the most favorable three should be taken. The three should then be qualified one after the other until the very best one has been found. The qualification process can be based on the following criteria.
A high-risk merchant account can enable you to accept credit and debit card transaction through your customers based anywhere in the world. Before choosing a high-risk merchant account provider, a merchant must review the terms and conditions and the fine print involved. It is very much expected that the high-risk merchant account fees will be much higher than normal traditional accounts. Customer service is an important criterion before choosing your high-risk merchant account provider.
High-risk merchant accounts come with higher fees than traditional merchant accounts. Your specific business type, registration with card brands (if applicable), and other factors all affect your final costs.
If you choose to take both Visa and Mastercard and have an MCC that requires card brand registration, you’ll pay $1,000 per year for registration with the two companies. That registration fee is not in your processor’s control and is in addition to the per-transaction rates and fees.
Processors will set pricing and terms on a case-by-case business, reviewing the details of your individual needs. It’s a good idea to get quotes from multiple processing companies to compare costs before making a decision.
The high rates and fees in a high-risk merchant account are due to the risk involved in the high-risk merchant acquiring.
Charges – The company with the least charges might not be the best perse, but it will help to keep the profits at a maximum. While deciding on the charges it is also important to consider the services being offered to determine if there’s value for money.
Services Being Offered – The other consideration should be on the services being offered. Different institutions will offer different services to their clients. For instance, some might have fast payouts for their account holders while others might not. The right company is the one that will offer the services tailored to meet the needs of the business.
Clear Communication – The company should also offer very clear communication regarding how their business is conducted. This should be given in writing. The company should indicate clearly how the payouts are made when they are made and the frequency of the payout.
For the application process to be smooth sailing, the applying business should ensure they have all the requirements at hand. The information provided should be clear and true. The business should also have all the funds required to start the account if any. It is possible for accounts to be denied when the applications are not made properly.
A genuine payment processor will not approve easily and will take time to review the requirements a merchant has submitted. Some of the requirements that may be obligatory to submit before a processor underwrites a high-risk merchant business are as follow.
The bank that offers the high-risk merchant services is called the acquiring bank while that that offers the credit or the customer’s account is called the issuing bank. For the acquiring bank to safeguard themselves from losing a lot of money, there are several risk management features put in place. Here are some of those safeguards used.
Delayed Settlements – In this solution the acquiring bank holds the funds for a slightly longer period than for other merchant accounts. This is done to safeguard the bank in case of a fraudulent transaction.
Use Of Reserve Account – In this method the acquiring back uses a reserve account where a portion of the funds is held for a certain duration. For instance, the acquiring bank may hold 15% of the funds for a month to three months. This cushions the acquiring bank from losses in case certain issues were to arise. The money is passed to the business after the period has elapsed and the process repeats itself.
These safeguards are put in place to protect the acquiring bank as the monies being transacted in the account have a high chance of refund, fraud, chargeback or reversal. When this happens, the acquiring bank has to incur administrative charges to deal with the setbacks.
High Rate of Chargeback– If your business experiences chargebacks quite frequently, this is a red flag for merchant account providers. While this metric isn’t usually indicative of your company, it does tell the processor about the patterns of your clientele. If your clients have a history of chargebacks, then your business is most likely going to be considered high risk because it will require greater chargeback protection. Most low-risk businesses have zero chargebacks per month.
High Rate of Fraud– If it’s common to see quite a few fraud transactions processed by your business each month, this is yet another way your business might be deemed high risk. Using only a virtual terminal and processing the only card not present transactions in many cases will lead to the necessity of a high-risk account.
Selling goods that walk the line of legality -If your business is selling goods that could be associated with illegal activity, you’re most likely going to need high-risk merchant account providers to process payments. If you sell Items like marijuana paraphernalia or elements from the pornographic industry, a high-risk merchant account is potentially your only option to accept credit cards.
Offshore Businesses – If your business is located overseas but operates here in the United States, this is a huge red flag for the underwriters of merchant accounts. Without the ability to see and know all of the inner workings of your company, there’s really no way to be sure that your company is completely legitimate and trustworthy. That’s enough to push your business towards the high-risk label.
Guilty by Association – If your business is commonly associated with the type of business that’s seen as a pyramid scheme or another type of scam, high-risk merchant accounts are probably your only option.
Merchants with Bad Credit – One of the determining factors for authorizing any merchant account is the credit score of the business owner. If your credit score is rated as bad credit, that reflects on how risky it is to authorize your business for a merchant account. If your credit score is really bad, even a high-risk account may not be an option until you’re able to raise your score to a healthy level. While it’s not impossible to get an account with a payment processor with poor credit, it can prove more difficult.
High Average Ticket – If your business has a very high average ticket, you might need a high-risk merchant account. If you think about a convenience store with an average ticket of $7, it would take many chargebacks to equal the same dollar amount of a single chargeback for an electronics store. If your average ticket is very high, this alone might push your business into the high-risk category.
It is a big task to search for the right payment processing company for high-risk merchant processor for high-risk merchants who have essentially almost the same needs as everyone. A monthly fee may also be charged to the businesses falling in high-risk merchant category. The processing fee of a high-risk merchant account totally depends on the business type and the processing history of the merchant. The merchant accounts with high risk involved may have higher reserves and additional terms and conditions.
If your business is categorized as high risk, it may be challenging to obtain a merchant account. At iPayTotal, we provide high-risk merchant accounts customized for your business needs. Our high-risk merchant accounts are available to merchants in need of a swift, trusted credit card processing solution. iPayTotal allows you to accept credit and debit card payments within just 24-48 hours of your application approval. iPaytotal is one of the top 10 high-risk merchant account providers worldwide. For average tickets value sales, high-risk merchant account providers do not raise that many questions, but for high-value ticket transactions, the providers handling the transaction make sure that their risk is taken care of and that’s the reason high-risk merchant account processing services, expect extra documentation, higher rates, and difficult terms. Ipaytotal has partnerships with some of the best high-risk merchant account provider in the UK, US, Europe and the rest of the world. We can help you get a high-risk payment gateway for your product or business. We have experience with all of the major merchant providers both in the USA and Internationally. Also, we work with all the major gateway providers and can help you get a high-risk payment gateway today.
We are experts in assisting you with gateways for Firearms, Tobacco, Bail Bonds, Jail Phone Cards and Tech Support. Businesses selling Nutraceuticals, Garcinia Cambogia, Raspberry Ketone, weight loss, skin care, and other supplements can require additional assistance with gateways. Also, Direct Marketing, Buying Clubs, Travel, MLM or Direct Response are industries we have a great experience with. In addition, dating and adult services, as well as online beer and liquor businesses, depend on solid gateways. Furthermore, we have the knowledge and expertise to set up your gateway accordingly. iPayTotal gateway is packed with features tailor-made for any high-risk merchant. Each account is equipped with a virtual terminal that utilizes a standard key-in process or swipes credit option. Additionally, checks can also be processed from anywhere that uses an internet connection. Another extremely useful function is the ability to route multiple MID’s all from one single gateway. Consequently, load balancing can be automated to direct transactions to various merchant accounts. This is a powerful tool to ensure account stability.
IPAYTOTAL continues to earn recognition among the best high-risk internet merchant account providers in the business. We think our commitment to excellence and going the extra mile to exhaust every opportunity is our mantra. We strive to exceed expectations and utilize our expertise and competence to deliver unsurpassed customer satisfaction.
To find out more about High-Risk Merchant Account Solution. Give us a call at +44 800 776 5988 or get in touch with us through our website. Even if you’re not a customer of ours, we want to help you understand the process so you can make the best decisions for your business. We believe transparency and proactive education is the best policy.