USA Payment, LLC
USA Payment, LLC

What is a high risk merchant account?

April 24, 2013 by  
Filed under Uncategorized

High Level Overview: What is a high risk merchant account?

By: Guest Blogger for, but not affiliated with, USA Payment

A high risk merchant account could pertain to any type of business that accepts payments, often times credit cards, with an unusually high potential of credit card fraud. Credit card fraud is not just a problem for business owners but also for the credit card processors. It is a huge problem, with both time and profit lost, for the merchant account providers who have to investigate the fraud as well as the business owners who may be at risk of fraud.

There are a number of reasons why a merchant account provider would consider a merchant services account as a high risk merchant account. Since the credit card holders are not able to physically sign a receipt for an ecommerce sale, many banks and credit card companies will actually hesitate or refuse to approve high risk merchant account requests made by businesses that fall under the label of “high risk” designation. In some cases, this type of business or industry is known for having a high instance of chargebacks or fraud or maybe the business principals have poor or insufficient credit.

With this in mind, acquiring a high risk merchant account can sometimes be very difficult, time consuming, or both; however, there are experts in the field of high risk merchant accounts who know the best options with regard to getting your merchant account approved, sometimes in as little as two days. There are many businesses that routinely fall under the label of the “high risk” designation for merchant accounts including, but not limited to, adult industry, escort services, gambling sites, travel and timeshare sites, pre-paid/contract, tobacco/e-cigs, firearms/guns/ammo, MLM, remote PC tech support, merchants on the TMF list, and many more.

Merchant accounts can be designated as being high risk for many different reasons.  As a result, the merchant account providers have the ability to label your industry as high risk during the merchant account underwriting process. Virtually all online gambling sites and many adult industries fall under this very broad umbrella. If an online merchant is involved in business that does not involve face-to-face transactions, the merchant is probably going to be considered higher risk, but not necessarily high risk or hard to place, to the banks considering their merchant account request.

A majority of businesses that want to accept credit cards will not fall into the high risk merchant account category and will not need this type of account because they offer what are considered to be traditional products and services; however, there are certain niches that are higher risk in nature, and accepting credit cards from customers can present a problem. Merchant services providers understand that higher risk sometimes requires higher cost to cover greater fraud and risk liabilities.  As a result, they charge higher fees or reserves to process transactions for these types of customers. A provider that is familiar with the high risk industry will be able to better underwrite for these risks and provide merchants with more competitive fees and terms than those that typically handle traditional merchant accounts.

Therefore, getting a processor to provide a high risk merchant services account requires expertise in this arena. If you are an unregistered business entity, have a bad credit history, provide a product or service on the high risk industry list, have been banned by other merchant account providers, or plan to pursue an offshore merchant account then you are likely in need of a high risk merchant account. But, if you find that you do need a high risk merchant account make sure the provider has authority to initiate all types of transactions, can process and complete all types of transactions, and has the resources to help protect you against fraudulent transactions. Also, make sure that the high risk merchant services provider keeps your personal and business information completely confidential. It is important to work with a provider that understands the high risk market to ensure your account is set up properly and to keep the account open and active in the long term to make it the safest, most efficient, hassle free, and profitable experience possible.

Blog post from 10/20/2016

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