High-risk merchant accounts allow “riskier” businesses to process credit cards.
The “high risk” of these types of businesses (discussed below) are:
- the payments or funds may not go through,
- they have a higher history of fraud,
- they receive numerous chargebacks,
- they sell services which are not tangible and cannot be measured.
The financial institution who provides the payment processing is then responsible for those funds.
More about what makes a business a “high-risk merchant”…
Typically, businesses such as travel agencies, credit collection services, any “adult entertainment” business, e-commerce, legal gambling businesses, bail bonds, etc. are all considered high risk.
They are given this label because the bank who processes is agreeing to take on a financial risk.
If your business does a lot of e-commerce, those particular types of transactions are a red flag for banks, too. Fraud is especially common with e-commerce and there is a much higher risk for banks to process online payments because your business never actually sees an imprint of a credit card.
When you take orders over the Internet, everything is digital and this significantly increases the chance for fraud.
Some banks will still do business with a high-risk merchant but it usually comes at much higher fees than for non-high-risk merchants.
Here are a few different ways banks decide whether your business is high risk:
- If you have had a previous application denial by a Merchant.
- If you have bad business credit or credit scores below their standards.
- If you are an international merchant doing business outside of the country.
- If you’ve experienced a large number of high chargebacks or a growing number of chargebacks in general.
- If your business is a high-risk industry like a debt collector, online pharmaceutical company, or sees a lot of high ticket sales.
If any of these apply to your business, it could be enough for a bank to label it as high risk. This doesn’t mean they will refuse to do business with you necessarily, it just means you may be subject to a more “strict” set of rules than the other guys.
This kind of situation is common and a lot of times it isn’t always because of the type of business; it’s the kinds of payments they receive are more prone to fraud.
In some industries, it’s more common for someone to pay with a stolen credit card or one with insufficient funds available.
Because of this, banks are much more cautious when deciding whether to allow a business to open a merchant account with them. And if they accept a high-risk business, it’s usually at a premium cost.
You do have other options besides banks if you are having trouble getting service which still works with your budget. There are several processing companies who work specifically with high-risk businesses and they do a pretty decent job of offering competitive rates to businesses considered high risk.
It may still be higher than the rates you would get at a bank if you weren’t high risk, but it can still be a better option than going with a bank in some cases.
The best thing to do is look into those companies and find out what rates they can offer you before signing up through a bank which could be outside your budget.
Finding reliable high-risk merchant accounts providers can be pretty challenging for new businesses, online merchants, and recently terminated merchants.
But not all is lost! Look into the companies who specialize in helping high-risk merchants. They’re out there, and sometimes they are better.
You might end up paying higher fees than the guy next door does, but your customers don’t know this and as long as you are keeping them happy, they’ll keep coming to you first anyway!
So, let’s look into this matter a bit more deeply: Are the payments you’re receiving high risk?
That’s a key step to know if you really do need to open a high-risk merchant account or not.
If your business transactions are within the “normal zone,” then you’re safe. However, if your transactions are similar, or at least, related to those I mentioned above—then you need to get a high-risk merchant account.
Come to think of it—why do we need merchant accounts in the first place?
Well, it’s because we want to serve our clients well. It’s about customer service. After all, the better our customer service, the happier our customers and clients will be.
Of course, when you have happy customers—your business (and your wallet) will be smiling as well.
Think about it: What if your customers wants to pay you via a certain payment method, and you can’t—simply because you didn’t get the right merchant account?
Wouldn’t that be frustrating to your customers?
Wouldn’t that mean you’re unable to give your customer what they want?
Now tell me: Is this good for your business?
Are the savings you earn by not getting the appropriate merchant account—worth losing your customers over?
Well, the answer depends on you.
However, if you ask me: I’d say you should get a high-risk merchant account if you have to. Otherwise, you risk losing a big part of your market, and you risk losing your business.
Yes—high-risk merchant accounts may seem hard on the budget. But fact of the matter is, if we need to get such accounts to serve our clients better—then so be it.
Remember: Business is about making the right investments. It’s about ensuring your business stays afloat, through the right tools and methods. More importantly, it’s about serving your customers well.
So, is a high-risk merchant account an investment?
With the right merchant account, you get to ensure that whatever payment methods your customers want, you’ll be able to deliver.
Besides, if you get a high-risk merchant account, you get to accept more payments from your clientele. And what does that mean? More profits for you in the long run.
Definitely, a high-risk merchant account is an investment. And a good one, if I say so myself.
In a world full of credit cards (that’s been made more challenging by credit card fraud)—getting the right merchant account can save you a lot of money later on.
We all know this: People love to use those plastic credit cards. And that’s not surprising. After all, they don’t only make buying stuff easier, but they actually allow you to make online purchases as well.
Unfortunately, there’s a little complication with credit cards: They are quite prone to fraud.
In fact, some of the world’s largest and most established companies have been victims of credit card fraud. And that fraud amounted to a total of billions of dollars in losses.
Alright. So, the complication isn’t “little.” It’s actually a big problem for business owners today.
But then again, what should we small business owners do? Should we stop accepting credit card payments, because they’re just too risky?
Of course not.
Do that—and you’ll go back to square one.
Again, the key here is to make the necessary “investments.”
Beef up your payment security. Make sure to use the appropriate features and tools (ex: EMV readers) to ensure that those credit cards you’re accepting are actually being used by the real, actual owners. Better yet, get a high-risk merchant account (if you have a high-risk business) to add more to the equation.
Please do note that running a business will involve a lot of risks.
However, the key strategy is not to run from those risks. The right plan of action is to ensure that you are preventing, or at least, minimizing risks. This way, you continue running your business—although a bit more smartly and safely this time.
You know what?
In the long run, your business will rely on how strategic and well-planned you are.
Here’s a piece of advice: If after careful thought, you realize your business is indeed high-risk, then get that high-risk merchant account.
This way, you get to provide greater protection for your customers.
And you get to protect your business as well.
Obviously, that’s a win-win solution.
And don’t worry about the higher rates for high-risk merchant accounts. You can actually get them at a more reasonable rate if you get the right help.
Want a high risk merchant account that won’t cost an arm and a leg? Call RedFynn at (888) 510-9871.
Check out RedFynn’s merchant services. We offer the same low rates for our high risk merchant accounts as all our other accounts!
We guarantee the lowest rates anywhere, and we provide unparalleled, premium, personal customer service! Visit www.redfynn.com to learn more today!