As a business owner, you've probably never heard the term high risk merchant account. You will never hear this term until a merchant provider tells you your business is high risk. It might seem like this sort of judgement is unfair to your business as well as yourself. This really isn't the case because in the point of view of the merchant provider they are indicating that your business poses a greater risk to them in terms of chargebacks. This risk has nothing to do about the performance of your business or what your business has actually done.
What is Merchant Account Risk All About?
No single industry-wide standard applies for what is high risk. This is a very subjective thing and it can be based on any number of different factors. Each processor, bank, and individual company will have its own policies for identifying and classifying businesses as being high risk. Have a look at the Visa Global Acquirer Risk Standards -- as you can see it can get very complex!
Why Does Having the High Risk Designation Even Matter?
When you are identified as needing a high risk merchant account it usually means that you need to go through extra scrutiny before you receive certain merchant processing services. You may get a monthly cap, or you may have to provide a cash reserve.
Other things you might be subjected to include higher fees for merchant services that you want because you've been classified as a high risk. In some cases, you may find certain merchant providers are not willing to work with you because you've been designated as high risk.
What Makes a Business High Risk?
There are several reasons why a business will need to apply for a high risk merchant account. By understanding this definition, it will help you get the best merchant services for your business.
1. Working at Home
Where your business is located is going to matter for a merchant provider. For example, if you have a home-based business then this is automatically riskier. If you do business in various countries (company is in one country, owner is in another etc) this can also classify you as a high risk merchant account. You should be aware of these things before you apply.
2. How Long You Have Had Your Business
If you have been in business for a long time then you're going to have more merchants and partnerships available to you. If you already have a long positive relationship with a merchant provider, it's going to be much easier for you to get a new merchant account.
Keep records and be transparent about your business when you apply. Merchant providers could classify a newer business as high risk because they simply don't have a track record behind them. More acquirers are going to want to work with an established businesses.
It’s critical that you try to avoid chargebacks as much as possible. You should have policies in place to deal with customer problems, and implement them. You should keep in contact with your customers as much as possible and offer refunds swiftly, in accordance with your Refund Policy.
4. The Industry
Some industries are simply going to be riskier than others in terms of how they view your products or services, and billing model, and whether you pose a large risk to merchant providers.
5. Your Own Credit
For US-based merchant accounts, your own personal credit could come into play in terms of the acquiring banks that want to work with you. If you have bad credit, try to resolve this as quickly as possible.
A High Risk Merchant Account Is Not A Problem!
It's critical that you make the right decisions when it comes to getting your high risk merchant account. At IntegralPay we can provide you with online payment processing options for a variety of industries considered "high risk" through our vast network of acquiring banks and payment service providers worldwide.