A high-risk merchant account allows you to run a modern business, by accepting card payments. This makes it much easier for customers to choose your services, as they don’t need to worry about carrying cash on them to cover these expenses. This is a standard convenience that customers look for, and they tend to be frustrated when it isn’t offered by a business.
What is a High-Risk Merchant Account?
In a world that is rapidly pushing towards being a cashless society, with the average person using credit and debit cards instead, businesses need payment processing systems. A high-risk merchant account is just that, a payment processing account. In particular, it’s one that allows merchants to accept card payments. This merchant account is deemed high risk due to the potential for chargebacks on the account.
What Makes an Account “High Risk?”
Not every merchant account is the same. Some are considered high risk, while others are low risk. At the most basic, businesses with a high potential for chargebacks are likely to be named high risk. However, there is more that goes into it than that. The reputation of your industry is key to whether or not you’re labeled high risk. The next thing that you will be judged on is your own processing history. For instance, if you accept multiple types of payment, take in over $20,000 a month, average over $500 per credit card transaction, or have a generally bad credit history then you could be at risk of being labeled high risk.
A low-risk account differs in several keyways. For one, they should be operating in a country that is generally considered low risk. The United States of America and countries in the European Union are good examples of this. From there, they need to be in a low-risk industry. Baby supplies, for instance, are often considered to be a low-risk industry. After those two things, it comes down to your business’ history. It’s important that a low-risk business has minimal returns and a near-zero chargeback ratio.
What Businesses Need High Risk Accounts?
Because your industry may label you as high risk, it may not matter what your processing history is. A high-risk industry is seen as anything that could commonly have cancellations, or customers asking for their money back. An airline, for example, may change your flight or cancel it entirely depending on several factors. Oftentimes, these factors are outside the control of the airline themselves. However, this does lead to a lot of cancellations from customers and requests for refunds and chargebacks.
Along with airlines, here are a few industries that are generally considered high risk:
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- The vacation, travel, and timeshare industries
- Event planning and ticket distribution
- Gambling, in particular, online gambling
- Adult entertainment, including online, over the phone, in store, and in person services
- Attorneys and other legal services
- Online gaming, chats, and other similar services that can be purchased for video games
- Product reselling, including antiques and collectibles
- SEO services rendered
A high-risk merchant account may come with higher fees to pay, but there are a ton of benefits from using one. This includes a lot of flexibility and support from the account vendor. Furthermore, they will be able to offer you cutting edge technology and security services, so you know that your account is safe.Generally speaking, applying is as easy as going online and filling out an application. So, there is no excuse not to have a merchant account if you want one. From there, you will be able to expand and grow your business to be as successful as it possibly can be.
