In today’s modern digital world, almost every business operates online. If a business doesn’t have an online presence, it has fewer chances to grow and be successful in the long run. Therefore, to ensure all online transactions are seamless and efficient, merchant services such as a payment processor can help you achieve this in a cinch.
It’s imperative to note that your payment processor can either label your business as high-risk or low-risk. If you happen to fall in the category of high-risk, you may have to face some difficulties. For example, you may be able to get a bad credit merchant account from one of the service providers, but the costs will be higher down the line.
If you want to know the details about being labeled as a high-risk merchant, keep reading this article!
What Is a High-Risk Merchant Account?
A high-risk merchant account poses more financial risk to the payment processor than the other ordinary accounts.
If a business operates in a risky or volatile environment, it can also be deemed as high-risk. Why? Because merchant service providers believe that they will have to bear additional costs due to these high-risk businesses’ low or inconsistent income.
Some of the high-risk industries are:
- Travel agencies
- Legal firms
- Firearm dealers
- Online gaming
- Debt services
However, you must keep in mind that you may be still considered high-risk if you have a poor credit history or business financial information.
What Should High-Risk Merchants Expect?
After being identified as a high-risk merchant, you may notice that the costs are slightly higher, and the conditions are a bit different than a low-risk merchant.
Rather than having access to a standard merchant account, you will be given a high-risk merchant account. The credit card processing fees will be higher because the payment provider wants to stay in the safe zone if you cannot pay them money.
Moreover, they may also come up with strict terms and conditions to deal with chargebacks in a better way.
Usually, the low-risk merchant accounts are short-term and high-risk merchant accounts are long-term, such as up to 5 years long with automatic renewal clauses.
The high-risk merchant accounts may also have to maintain reserves such as upfront, rolling, or fixed reserves. This ensures that no matter how bad the financial performance of your business is at some point, the payment processor still gets paid through your reserves.
What Should a High-Risk Merchant Do?
No matter how strict the terms are, you still need a reliable payment processor to make sure your customers are able to easily purchase your products/services, and you are able to receive funds in your business bank account.
Even if you are labeled a high-risk merchant, it doesn’t mean that you can’t avail of merchant services. There are plenty of merchant service providers that deal with high-risk businesses. You just need to make sure they are able to fulfill your business needs.
Before finalizing a payment provider, you need to ask them about different payment methods, what services they will be able to provide you, and how they assure the privacy of sensitive/confidential data.
Although your options may be limited as a high-risk merchant, and you may have to accept the rigid terms and conditions, it’s still better to keep looking for a merchant service provider until you find the one that best matches your preferences.
