What Is a High-risk Merchant Account?
Do You Qualify for One?
The rise of digital payments has led to an ever-increasing number of businesses seeking cost-effective payment processing solutions. However, not all businesses are viewed equally by payment services providers. There are certain industries that carry greater risks of fraud or chargebacks, making it difficult for businesses in these industries to find the right payment processor.
If your business falls into the “high-risk” category, you may struggle to find the right payment processor.
But who determines if a business is high-risk? And what factors determine the risk? In this article, we’ll help you understand all this and more, so you can be better prepared to find the right payment processing partner for your business needs.
What is a High-risk Merchant Account?
Businesses that are characterized as “high-risk” will need a high-risk merchant account to accept debit and credit card payments. However, there is no central authority or framework in the payments industry that determines the risk factors associated with a business. Instead, every bank and every payment processor has its own set of standards.
What Factors Determine If a Merchant Is High-Risk?
Businesses from certain industries that innately carry higher risks may be automatically flagged as high-risk businesses. These include CBD (Cannabidiol), e-cigarettes, and vape, stun guns and tasers, credit repair, multilevel marketing (MLM), adult products/services, pawnshops, supplements and nutraceuticals, tech support, and search engine optimization (SEO) services.
Besides this, there are many other factors that could result in labeling a business as “high-risk”:
- Some processors could label you as “high-risk” if you are a new entrant and have never processed payments before.
- Poor credit records or low credit scores for defaulting on loans, etc., are other significant factors. If a processor has previously put you on the MATCH list, that could increase your risk perception as well.
- The same goes for businesses that have controversial product lines or operate on a slippery legal slope.
- Businesses that are overly dependent on international sales may also have high-risk scores. This is because of the relatively unpredictable economic dynamics abroad.
- Industries that are highly regulated by legislation or governments are also labeled “high-risk.”
How Do High-risk Accounts Differ from Regular Accounts for Payment Processors?
Being labeled as a high-risk business can seem daunting. A processor may simply decline your application. Alternatively, however, a payment processor might choose to offset your inherent business risk by enforcing some measures.
There are several ways in which a payment processing company may mitigate its risk.
These are also the prime differentiators between high-risk and regular merchant accounts.
Longer application process: If you’re applying for a high-risk merchant account, a merchant services provider may ask for very detailed information to analyze your risk profile or study past patterns of your finances. Typically payment processing companies will check your business’ processing history, partnerships, and even your personal credit history (to watch out for bad credit, etc.).
Higher payment processing fees: For a high-risk merchant account, payment processing fees could go up to 1.5% plus the interchange rate. While interchange fees may vary from company to company, in general, higher risk will incur higher fees.
Cash reserve requirements: Some payment solution providers might even hedge a certain amount of cash for a business. They may maintain the thresholds of this reserve in a number of ways:
- Rolling reserve: A high-risk payment processor sets aside a proportion of every transaction that you process (which you’ll receive later). This could be as high as 10%. For instance, if you have a six-month rolling agreement, you receive the balance from January in July.
- Capped reserve: The processor holds a certain
High-Risk Payment Processors specializes in high-risk merchant accounts.
Save Time and Costs from the Start.
High Risk Payments offers an underwriting process upfront that flags risk factors early on and saves you time and costs. Unlike other providers that may cut you off at their discretion at any time, High Risk Payment Processors will not surprise you with unfavorable policies.
In conclusion, if you are a high-risk business looking for a payment processor, it is essential to understand the requirements for high-risk accounts and find a payment processor that can cater to your specific needs. High Risk Payment Processors is a reliable option that can help you navigate the complex world of high-risk payment processing. Contact them today for a consultation and to check your business’s risk factors upfront.
Industries We Serve
Our Process
Submit Your Completed MPA
Send us your completed and signed merchant application along with any necessary supporting documents.
Get Your Approval
Boarding and approvals take 3-5 business days depending on the account and needed documentation.
Integrated Payments
Once approved, we’ll provide you with hardware or payment gateway options for your high risk merchant account.
