A high-risk merchant account is considered less reliable by merchant service providers, and many will hesitate to provide credit card processing to them because they don’t want to suffer great losses. There are multiple things that can make providers see your account or business as high-risk. What exactly is a high-risk merchant account, and what are the consequences of having a high-risk merchant account?
Is my business considered high-risk?
There could be many reasons why account providers have denied you. First of all, your business may be in a high-risk industry. These industries are considered high-risk because they incur a lot of chargebacks or receive unusually high chargebacks. Some carry reputational risk as well. The following industries are a few examples known for their high-risk track record:
- Adult and online dating companies
- Cigarette, e-cigarette, and tobacco
- Bail bonds
- Financial services, including credit and debt-related services
- Multi-level marketing
- Real estate
If you operate a business out of your home or on an online storefront (such as Amazon, Google, or eBay) you will likely need a high-risk merchant account. Typically, any businesses that rely on annual memberships and renewals are under scrutiny as well. Service providers prefer to work with businesses that are stable and are less likely to cost them a lot of money.
You may be a high-risk merchant
If you’re encountering difficulty even though you aren’t working in a high-risk industry, perhaps you are considered a high-risk merchant. The biggest obstacle is typically a low credit score, but there are other factors that could influence the decision. If you employ shady marketing or sales tactics, you may face difficulty in finding a credit card processor. Operating an off-shore business also poses a risk.
If you’ve previously operated a business that had its credit card processing services revoked, you will be listed on the Terminated Merchant File, or TMF. The TMF is an extensive database, and once you’ve been added, your name will remain on for five years. You may have suffered too many chargebacks, breached your contract, or committed fraud. Whatever the reason, this history will mark you as high-risk.
A high-risk merchant account isn’t the end of the world
Although you’ll face difficulty with some merchant account providers, some service providers specialize in high-risk merchant accounts. Remember that just because you aren’t considered high-risk by one provider doesn’t mean another provider won’t. As a high-risk merchant, you’re more likely to be handed higher rates and tighter terms within your contract. Does that mean you should hop onto the first seemingly nice offer you get?
Not without carefully examining the contract. There are countless providers that take advantage of high-risk merchants by offering predatory contract deals. Some reputable high-risk merchant account providers include Durango Merchant Services, Payline, Host Merchant Services, and Vantage Payments.
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