The truth behind ‘high risk’ merchants

In order to accept credit card payments from your customers, you need a merchant account.  This is generally not a difficult process to get set up. However, for merchants in certain "high risk" business categories, it can be a bit more complicated.  The solution is to find a payment processor (acquiring banks probably won't do it) that will give you an account despite your high risk category.

What does high risk really mean?

The words "high risk" may bring to mind illegal or unsavory sorts of businesses, but that is not the case at all.  An illegal business is not going to be able to legitimately acquire a merchant account at all - no matter which payment processor they choose.  No, high risk businesses are businesses that historically have a high frequency of customer chargebacks and disputes. 

The following is a list of some of the most common of these businesses:

1. Online Pharmacies
2. Casino and gaming sites
3. Crypto OTC trading
4. Travel Service and packages
5. Software Downloads
6. Computer Hardware
7. Online Niche Foods
8. Low Risk Retail
9. Realty Listing
10. Online dating
11. Voice Over IP Companies
12. Inbound Telemarketing
13. Continuity Programs
14. Legacy Programs
15. Mail Order Companies

None of the above business models are illegal.  But some of them do have a history of shady operators, so banks are more cautious in granting merchant privileges to them.

If your business is in one of these categories and/or you have been declined for a merchant account, the solution is to work with a high risk merchant service provider who can connect you with a bank that will accept you as a merchant. 

Key information your high risk credit card processor will need to be able to present to the bank includes, but is not limited to:

⦁    Scanned and signed merchant application

⦁    Your time in business (startups are a red flag!)

⦁    Bank statements for the past three months

⦁    Previous merchant account statements if you ever did process with another bank

⦁    Your current and projected monthly sales, average sale amount, high ticket amount, and company debt picture.

⦁    Passport copies of all owners.

Note: Some Multi-Level Marketing (MLM) companies may be seen as "get rich quick" or pyramid schemes and, therefore, unable to get a merchant account at all.  However, if the company has a good business model and sells an actual tangible product (like herbal supplements or phone service), there is a good chance of approval.

Some banks will grant you a merchant account but will want to withhold payment on a certain percentage of credit card sales and hold that money as a "reserve fund" in case of a sudden large dollar amount chargeback or series of chargebacks.  In most cases, the bank will eventually release those held funds, once you have been processing with them for a reasonable length of time adequate for them to develop confidence in your business.

If you work in a high risk industry and are looking for an effective way to accept and process credit card payments on your website,  enlist the services of a high risk merchant account provider today.

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Created on Apr 17th 2020 02:58. Viewed 246 times.

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