What Factors Qualify a Merchant Account as High Risk?
Factors that increase the risk
When it comes to merchant accounts and the risk you pose to payment processors, there are some risks that make your business stand out. Any one of the following could identify your business as a greater risk.
Businesses that Never Actually See the Card
This includes online business, home-based businesses, online dating sites, online auctions, and a variety of other businesses conducted over the world wide web. Even businesses that offer real products but manage the payment processing for the products online.
Reputation for Abundant Chargebacks
If you’ve experienced a huge number of chargebacks in the past, whether by mistakes made in the payment processing, a bad batch of products, or any number of other possible reasons, you could find that you’ve been identified as a high-risk merchant account and need to work a little harder to prove yourself in the future.
Industry, Location, and Clientele
Some industries represent a greater risk than others. Some from the nature of the business and others based solely on the reputation of the business. For instance, stores that offer adult products are just as likely to be rated as high-risk enterprises as those who deal with firearms. The same holds true for travel services, telemarketers, bail bonds businesses, online auctions, and dating websites.
Company Financials and History :
The other thing you need to do to avoid being listed as a high-risk merchant account in the future is to manage your account wisely today. This means avoid getting an account that provides more services than your business needs at the moment and staying up to date with all requirements of the merchant service provider you’re currently working with.
How Long You’ve Been in Business :
This is one that has a greater impact than many business owners realize. Newer businesses often need to prove themselves before they’ll receive preferred rates and status designations from payment processors and other merchant services providers. The longer you’re in business, the less risk many providers feel you pose.
Other High-Risk Designations
Not all high-risk businesses are considered high risk because of their industry. In addition to particular industries, individual businesses may be considered high risk for factors including poor personal credit; inclusion on the Terminated Merchant File (TMF or MATCH list) for processing misconduct, non-payment, or fraud; high dollar value transactions with no business history; high dollar custom products; large number of international transactions.