In this article we are answering these frequently asked questions:
- What is high risk merchant account?
- How to know your business is high risk labeled?
- Things a high risk business should take care of?
- How to get a high risk merchant account
- Fees under high risk merchant account
- How to select the merchant account provider?
- Why to trust iPayTotal?
WHAT IS HIGH RISK MERCHANT ACCOUNT?
Merchant account is a type of online account that allows your business to accept payments by debit or credit cards. Retailer, a merchant bank and payment processor make settlement of credit card/debit card through an agreement finalized by them for a merchant account. While there are businesses which are at higher risk than others. Such businesses have to go with a high risk merchant account, which simply means that the merchant has to face various restrictions and high fees. If your business is a high risk business, it makes it more difficult to get a traditional merchant account because with you merchant account provider takes on more risk when offering you a high risk merchant account. This results in higher processing rates and even rejection by many processors.
But don’t you worry, higher risk means higher returns!
HOW TO KNOW YOUR BUSINESS IS HIGH RISK LABELED?
This is a very common mistake done by majority of merchants; they apply for traditional merchant account without knowing that their business might be flagged as high risk. There are various grounds why a processor might label a merchant as “high risk”.
Some of them are listed below:
- The first reason is services offer related to safety and health concerns.
- You are in a sector with a high employee turnover.
- Your company deals in products or services that usually done in high dollar transaction.
- You experience a high number of returns and refunds.
- Your company’s viability or continued profitability.
- Your business is a startup with a very little credit card processing history.
- Your business is a completely new concept for the market, resulting less room for growth.
- You are in industry with high chargeback ratio.
- In the past, you’ve lost your merchant account because of excessive chargeback.
- You have a bad credit card history.
- You provide subscription based products or services.
- You are an international merchant.
- Number of years in business.
- High rate of frauds.
Here is the list of industries which are usually flagged high-risk by processor:
- International business
- Online Gaming/Gambling
- Adult entertainment
- Travel and hospitability
- Financial services
- Construction companies
- Card not present
- Legal services
- Health and Safety
And many more industries are in the queue.
THINGS A HIGH RISK BUSINESS SHOULD TAKE CARE OF?
Owing a high risk business doesn’t mean it’s back-breaking to run it properly. It may be more challenging to set one up. There are few thing which should be keep in mind by every merchant whether high risk business merchant or no risk business merchant.
- Length of timein business really makes a big difference. Merchant account provider wants to make sure that you are ready to face the challenges of business. You are aware with the risks and fraud around you and most of all you understand how to manage credit card acceptance. All these things can only be inherited by personal business experiences.
- Maintain a healthy credit card This report will show how timely you have paid past loans. Remove any past bankruptcies, late payments or liens from your credit card report. Irrespective of the size of the business, having a good credit card rating will make a nice and appreciative impression on the banks and merchant account provider.
- In case in past, you’ve lost your merchant account because of excessive chargeback or any other reason or you have faced any other financial challenges then stay loyal to your new merchant account provider.Acknowledge your past, you cannot hide any such public information, be honest, this will improve your credibility and definitely help you to get a new merchant account easily.
- If your business is labeled as high risk, you might face a lot of trouble in finding a perfect merchant account provider who is willing to take risk with you. In such situations, if you need to obey some restrictions or pay slightly more fees to open a merchant account, unquestionably do it! It’s worth it. Your extra cost can be recovered but lost customers are hard to gain back.
HOW TO GET A HIGH RISK MERCHANT ACCOUNT?
As far of now you must have understood what actually high risk merchant account is and how beneficial it is for your business. Now the very obvious question arises How to get a high risk merchant account?
So, here are the steps for getting a high risk merchant account.
Step 1: Find merchant account providers that specialize in high risk merchant accounts. And make a list of all.
Step 2: Now pick those merchant account providers who deal with your business type.
Step 3:Check reviews of each merchant account provider to make sure the company isn’t super shady or fraud.
Step 4: Analyze the rates and services offered.
Step 5: Once you find the ideal merchant account provider, apply for the account. Setting up high risk merchant account is a simple process but it is important to submit all of the necessary paper asked by the company in order to avoid delays.
Here is the basic list of standard items requested.
- High risk merchant account application form
- Articles of information
- Voided check
- IRS form SS-4
- Business financial statements
- Processing statements
- Business bank statements
*** It should be noted that these documents vary from company to company. ***
Step 6: After all the paperwork, a contract is signed. Read the contract carefully and understand every segment of it. If you have any doubts ask the merchant account provider hand to hand. The merchant agreement govern the entire relationship between a business and the provider, hence, it’s an important document.
FEES UNDER HIGH RISK MERCHANT ACCOUNT
When you choose for high risk merchant account, payment processing is going to be more expensive for you. However, you should not forget that major payment processor may not want to work with you. Remember, the benefits of accepting credit card payments will far outweigh any cost incurred.
Traditional merchant account is much cheaper than high risk merchant account. Apart from this your merchant account provider might stuck you in long-term contract (from 3 to even 5 years), they have an automatic renewal clause that extends it for one-year period after that. Firstly they have Set-up fees which will be charged after your application is accepted. Your contract will also usually have an early termination feesthat applies if you close your account before the end of your contract term. That’s why it is crucial to read the contract properly. You also have Capture fees, it is charged by the provider for offering you a terminal with which you’ll be capturing card information. You can also expect that at least some of your Recurring fees, basically your monthly account fee along with a fixed percentage of the value of each sale. Another expense you’ll have to deal with is a Rolling reserve; it is set aside from the proceeds of your sale to cover unexpected expenses such as chargebacks.
Again it is reminded to read the contract properly and understand all the fees.
HOW TO SELECT THE MERCHANT ACCOUNT PROVIDER?
When you are a high-risk business, it itself is a pressure on you. Don’t take any decision in a hurry because any wrong selection can adversely affect your business.
Here are some important points to keep in mind while selecting the merchant account provider for your business.
- Choose a provider with a great track record in getting high-risk businesses account approved.
- Consider the specific need of your business.
- Research properly about the company. How long they have been in business, their technical competence, their online reporting capabilities, etc.
- Completely avoid those companies who hide fees in their contracts. Market is full of such companies. You need a trustworthy, honest companion like iPayTotal.
- High-risk business are already full of expenses, try to go for month to month contracts instead of multi-year contracts.
- If your business doesn’t have any regular chargebacks history, there’s no really good reason for paying high rolling reserve. Choose a company which has low rolling reserve charges.
- Read the contract properly and understand the charges and rates. Only choose a merchant account provider who provides you worth paying services. And rates are in your budget.
- Be certain to discuss debit card and credit card processing rates as they are different.
- Choose a merchant account provider which gives you 24/7 customer service. So, that you can freely discuss your doubts.
WHY TO TRUST IPAYTOTAL?
Selecting the perfect Merchant account provider is an important decision for your business. Do your research and don’t forget to keep iPayTotal in your list. We are sure we will match all your requirements. IPayTotal with decade of experience and professionals works for the betterment of your business. We practically approve every business type, even when you have been turned down by other high-risk payment processor in past. We are also giving 24/7 customer services. We have experts dealing with high risk businesses and have made our own name in this field.
Make a wise choice.
And let’s get started!