In the payments industry, the phrase high-risk is a bothersome misnomer because it is used to characterize businesses that aren’t truly dangerous but happen to sell items that underwriting banks have moral reservations about. But don’t worry: high risk can imply low sales or profit. On the contrary, you may still expand your business while delighting your clients.
A high-risk merchant account indicates that your payment processor has deemed your company more vulnerable to fraud or chargebacks. High-risk merchant accounts pay higher processing costs to compensate the payment processor for the risk it is taking. This article explains why a merchant account is classified as high-risk and the steps taken for high risk processing.
What is a High-Risk Merchant Account?
Merchant accounts, a vital instrument in payment processing, are obtained through a merchant-acquiring bank or payment processor. However, because these corporations seek to issue merchant accounts while minimizing their exposure, many high-risk enterprises may find getting a merchant account through regular channels challenging. A high-risk merchant account is a bank account where transactions (from credit and debit card transactions) get held until final settlement, when processing fees get subtracted and funds are transferred to the merchant’s business checking account.
Businesses unable to establish a merchant account from a typical banking institution must work with high-risk merchant processors. We connect our clients to services that support them by easing the process of getting a high-risk credit card processor.
If a payment processor determines that your business account is at high risk for chargebacks, fraud, or a high volume of returns, they will classify it as high-risk. That could be because you are a new merchant that has never accepted payments or because your industry is considered high-risk and has a high possibility of fraud (e.g., controversial products). To accommodate for this risk, high-risk merchant accounts pay higher processing fees.
Steps to set up a High-Risk Merchant Account
Finding a payment processor ready to supply you with a merchant account at a fair fee can be difficult if you’ve been labeled high-risk, but it’s possible. These six professional steps will help you quickly acquire a high-risk merchant account to begin economically processing consumer payments.
Step-1: Find a Service that specializes in High-Risk Merchant Account
If you look through a list of the “top merchant service providers,” you’ll see that those who remain highly ranked for delivering low rates and excellent service do not provide merchant accounts to high-risk firms.
Their refusal to create high-risk merchant accounts is a large part of why they can offer such low rates in the first place. By avoiding riskier merchants, they can keep their overhead low. Because the chances are they will charge you exorbitant fees and lock you into harsh contracts.
A payment processing provider that specializes in high-risk accounts will be able to provide you with not only better options but also lower charges. In addition, they can set up an account that is both economical and personalized to your business because they understand the subtleties of setting up a high-risk merchant account.
Step 2: Compare Different Merchant Services
Because you can accept credit and debit card payments in various methods, it is critical to select an acquiring bank or account provider that meets all of your requirements. For example, if you need to accept credit cards via traditional, mobile, and online payment methods, your chosen payment processor must provide services that allow you to do so. That will enable you to handle all of your finances in one place.
Some payment processors impose additional limits. In most circumstances, it also saves you money on additional setup charges or increased equipment fees. In addition, when comparing service providers, consider the types of organizations they serve and their customer assistance.
Step 3: Submit Your Merchant Application
Obtaining a merchant account was a time-consuming and challenging process until recently. In today’s time, getting a merchant account requires you to submit your business license, physically verify your business location, and provide information about your credit score.
However, because of developments in financial technology, the process is now straightforward and can be done in minutes. You only need to contact the correct provider who uses cutting-edge technology to handle all applications.
Step 4: Take account of the transaction, processing, and accounts fees
Unfortunately, even if you choose a specialty provider, you will undoubtedly have to pay more than a standard business because of your high-risk status. You will generally spend between 2 and 5 percent for every transaction, and account fees will vary significantly based on the services you use.
Nobody will offer you the slick rates and attractive discounts that most processors promote. You must understand this, so you don’t pass up a potentially excellent service for your company simply because the price is significantly higher than what you’ve seen elsewhere.
Step 5: Submit the Necessary Information and Documents
Follow the steps to enter all the necessary information about your company. That frequently calls for disclosing your data, that of the company, and any extra information relevant to your situation.
According to the service provider, this could be the procedure that takes the most time to complete. However, it is one of the most crucial because these extra precautions significantly increase the protection of your company and enable you to use all the merchant service provider has to offer fully.
Step 6: Configure the merchant’s hardware and software.
Before using the necessary merchant services, you must receive your equipment and configure your software. You might also be required to pay equipment charges and service fees after approval.
Most merchant account providers facilitate this procedure by offering thorough onboarding assistance. As a result, setting up your merchant account is easy if you follow the supplied instructions and ask for help from your provider when needed.
High-risk merchant accounts are for firms that are perceived to have a high rate of fraud or chargebacks when receiving credit card payments. In addition, these merchants pay more for processing since more labor is required to ensure that their payment transactions are accepted. Remember, just because a company was once classified as high-risk does not mean it will always be such.