- January 8, 2020
- Posted by: admin
- Category: Uncategorized
What is high risk merchant account?
An online account that allows your business to accept payments by debit or credit cards from anywhere at any point of time is known as a merchant account. The settlement of credit card/debit card payment is finalized by the retailer, a merchant bank and payment processor for a merchant account by making an agreement between them. Businesses are classified into two categories by financial institution and merchant account provider on the basis of the nature of business and some other factors which we will discuss later in detail; there are businesses which can work with traditional merchant account, while there are businesses which are at higher risk than others, they need extra security and effective risk assessment tools. 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 your merchant account provider takes on more risk when offering you a high risk merchant account which obviously leads to higher processing rates and even rejection by many processors.
But don’t you worry. This article will help you understand in detail about high risk business and high risk business merchant!
How to know your business is high risk labeled?
You wanted a merchant account for your business and decided to apply for a traditional merchant account and later got rejected by the merchant account provider and this is a very common mistake done by the majority of merchants, without knowing that their business might be flagged as the high risk they apply for traditional one and later suffer. There are various grounds why a processor might label a merchant as “high risk”.
Some of them are listed below:
Ø The reason can be that the services offered by you are related to safety and health concerns.
Ø You face the problem of high employee turnover.
Ø Your company deals in big dollar transactions.
Ø Your company’s viability or continued profitability.
Ø Your business is a startup with a very little credit card processing history.
Ø You have a high number of returns and refunds.
Ø Your business is a completely new concept for the market, resulting in less room for growth.
Ø You are in industry with faces high chargeback ratio.
Ø You’ve lost your previous merchant account because of excessive chargeback in the past.
Ø You credit card history is unattractive.
Ø You provide subscription based products or services.
Ø You are an international merchant and deal in multiple currencies.
Ø Number of years in business.
Ø Your industry faces high rate of frauds.
Here is the list of industries which are usually flagged high-risk by financial institution and merchant account provider:
- International business
- Online Gaming/Gambling
- Adult entertainment
- Travel and hospitality
- Financial services
- Construction companies
- Card not present
- Legal services
- Health and Safety
And there are many more industries in the queue.
What measures should be taken by high risk business?
Owning a high risk business doesn’t mean you can’t get approved and it’s back-breaking to run it properly. It may be a little more challenging to set one up but there are few things which should be kept in mind by every high risk business merchant which will help him to get approved for high risk business account.
§ Length of time: In business time really makes a big difference. Merchant account provider wants to make sure that you are ready to face the challenges of business.
§ 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.
§ Acknowledge your past: Stay loyal to your new merchant account provider in case in the past, you’ve lost your merchant account because of excessive chargeback or any other reason you cannot hide any such public information, this will improve your credibility and definitely help you to get a new merchant account easily.
§ Be mentally ready to pay slightly more: If your business is labeled as high risk. In such situations, if you need to obey some restrictions or pay slightly more fees to open a merchant account, unquestionably do it! It can turn as a best opportunity for your business.
How to get a high risk merchant account for your high risk business?
So far we have discussed the important features of high risk merchant account. Now the very obvious question arises how to get a high risk merchant account for your high risk businesses?
So, here are the steps for getting a high risk merchant account.
Step 1: Find merchant account providers in the market that specialize in high risk merchant accounts. And make a list of all to select the best one.
Step 2: Now pick those merchant account providers who deal with your business type or in your industry.
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 by them. Here are the important features you should look while analyzing merchant account provider:
- Choose a provider with a great track record in getting high-risk businesses account approved because that’s one of the major tasks for high risk business.
- Do consider the specific needs of your business for growth.
- Research as much as you can 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.
- A lot of expenses are already involved in high risk business, so, 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 because once you get into the contract then you can’t back off. 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
- 24/7 customer services should be provided by your merchant account provider. So, that you can freely discuss your doubts anytime.
Step 5: After all the research once you find the ideal merchant account provider, apply for the account. Setting up a high risk merchant account is an easy process but it is important to submit all of the necessary paper asked by the company in order to avoid delays and confusion.
Here is the basic list of standard items requested.
i. High risk merchant account application form
ii. Articles of information
iii. Voided check
iv. IRS form SS-4
v. Business financial statements
vi. Processing statements
vii. Business bank statements
***Documents vary from company to company. ***
Step 6: A legal contract is signed between merchant and payment provider after all the paperwork and verification. Carefully read the contract 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.
Step 7: Quickly set up everything and you are ready to take your business on great height of success.
Choosing the perfect Merchant account provider is an important decision for your business as it plays a vital role in your security of payment, growth of business and risk assessment. Do your research and don’t forget to keep iPayTotal in your list. We are sure we will match all your requirements. IPayTotal with a decade of experience and professionals works for the betterment of your business. We have been practically approving every business type, even when you have been turned down by other high-risk payment processor in the past. We are also giving 24/7 customer services. We have experts and professionals dealing with high risk businesses and making your experience better.
So let’s get started!