Why High Risk Businesses Get Denied Merchant Accounts and what’s the Way Out?

by Jason Simms Opening a High Risk Merchant Account

A merchant account is established under an agreement between an acceptor and a merchant acquiring bank. It is kind of a bank account that allows businesses to accept payments by payment cards, typically debit or credit cards. As the merchant processors or bank are taking risk to provide you with merchant processing capabilities, there is an approval process involved.

The merchant account application process evaluates you and your business information in order to analyze the risk involved with your business model. Instances of businesses going bankrupt or having an unreasonable amount of chargebacks all introduce financial risk and liability for merchant processors or banks. Hence it becomes imperative for them to check for high risk businesses that may prove counterproductive for their operations.

At times, banks or processors may even decline to provide high risk merchants with an account. Most merchant processors maintain a list of industries that they generally will not service due to their traditionally high-risk nature.

Some of the reasons why high risk businesses are being denied a merchant account include:-

The business may not be registered with local regulatory agencies. It may also have been blacklisted by merchant agencies due to fraudulent dealings or bankruptcy.
High volume of sales with multiple transactions making it susceptible to fraud, especially if the business is classified as high risk merchant.
The company is small with low volume of sales – thus, incapable of being able to afford fraud screening tools and make payments towards 3rd party processors.
Unfavorable personal credit history or Active tax liens.

If your business is classified as a high risk business and declined a merchant account, check out other options by doing an internet search for “high-risk credit card processor.” There are some processors who will provide you with a high risk merchant account. Such businesses are usually charged a high processing fee to cover the risk that is being assumed by the processor or banks.