High risk merchant account | 5starprocessing

 What is a High-Risk Merchant Account?

High-risk merchant account is a type of business bank account that is assigned to those merchants who present a degree of risk associated with their business. The industries that fall into the high-risk category are –

. Adult Entertainment

. Cigarettes and Tobacco Industry

. Tech Support

. Gun and Firearms

. Debt Consolidation

. Smoking Accessories

. Forex Trading

. Annual Memberships

. Bail bonds

. Casino and Gambling Business

. Telemarketing

. Telecommunication

Features that make Businesses to High-Risk Merchant types

The businesses with one or more of the following features make them to the high-risk merchant business –

. The business that has been blacklisted by credit card companies on the TMF or match list.

. A business that sells future deliverable products such as hotel reservations, tickets to an event, etc.

. A business that sells expensive items such as furniture or custom auto parts.

. Businesses with high sales volume, without having established any company financials to support the chargeback liability.

. Memberships of the businesses that have automated recurring billing.

Things That One Must Prepare While Applying For a High-Risk Merchant Account –

Here is a list of things that one must prepare before applying for a high-risk merchant account –

. Incorporation Certificate

. Shareholder Certificate

. Copy of your passport and utility bills of local directors and shareholders holding the share of more than 15%

. Processing History for the last 6 months (total volume, number of transactions, chargeback percentage)

. License number and name of the organization that issued the license

Things That One Consider When Looking For a High-Risk Merchant Account

There are many things that one must consider before making the final decision for a high-risk merchant account which are as follows –

. Flexibility and Customization – Make sure that you customize every element of the payment form and that discuss the rates, conditions, and features tailored to your business.

. Transparent Pricing – Search for precise information about the fees and potential added costs and make sure that there are no hidden or extra fees.

. Security Indicators – As a high-risk merchant, you need to have a payment partner that follows the strict security rules and provides a set of anti-fraud tools that will keep your business away from the fraudsters. Make sure that the payment partner offer a decent chargeback prevention system and a multi-layered approach to security.

. Accepted Business Models – Before you apply for the high-risk merchant account, make sure that the credit card processor works with industries your company operates in.

Pros and Cons of High-Risk Merchant Account

The various pros of a high-risk merchant account are –

. Global Access – High-risk accounts allow the networks to grow across the globe, allowing connections with world-leading countries such as China, which holds the leading market share on e-Commerce trade.

. Expanding Your Business – With a high-risk merchant account, you can sell the products or services that are not allowed when you have a low-risk merchant account, which gives you more opportunities for long-term growth.

. Increased Profits – Wider possibilities of the products you can sell grow your chances of earning more money.

 

The various cons of high-risk merchant account are –

. Fees Involved – Merchant accounts for the high-risk companies will come with higher rates than those posing the lower risk. These fees include much higher chargeback rates due to the nature of their business.

. Merchant Account Reserve – This is an account necessary for the merchant to open. For the businesses that are prone to high risk, the bank asks them to open a no-interest savings account. This is done to deal with an unexpected number of chargebacks in the future. As if the merchant is asked to pay a large sum of money due to a chargeback then this account will be used to pay off the customer.