Within the processing world, a variety of industries and businesses are considered to be high risk. If your business has already been rejected by a couple of credit card processors, you may be deemed as a high risk or your business may be regarded as being within the high risk industry.
Fortunately there are a number of account providers that cater specifically to high risk businesses and these providers will be happy to entertain a high risk merchant account.
What is High Risk Credit Card Processing
First of all, even though one service provider may consider your business as high risk, another provider may not. Really, it depends entirely upon the provider’s risk department or underwriting guidelines. Simply put, if their guidelines are very particular. However, should the guidelines be more lenient, you’ll likely be able to avail of a merchant account.
Additionally, if the service provider you apply to opts for a specialist high risk merchant service, then you should have no problem being approved. There are, however, some providers that do not specialize in high risk, but still maintain relaxed guidelines.
As a High Risk Category Merchant, What should you Expect?
The outlook here is not so good since high risk merchants are subjected to worse terms and steeper rates than normal businesses and there’s little, if any, room for negotiation.
Do be cautious, however. There are a number of ethical high risk processors, but there are plenty of unethical ones that are waiting in the wings to take full advantage. Thus, be sure to read the contract very carefully prior to making any commitment.
Assess the termination fees in addition to any other incidentals. Does the provider require a rolling reserve? If so, how much is the rolling reserve and for how long will it last? You’ll find that most high risk merchant account providers seek a reserve which serves to cover them should you go out of business or receive a high amount of chargebacks from your customer base.
What Makes your Business High Risk?
There are a variety of reasons why your business may be regarded as high risk. Perhaps it’s because your particular industry is recognized for a sizable instance of fraud or chargebacks. Or maybe your business has bad credit.
If you are an offshore business, this places you within the high risk category for some providers.
If your product (or service) borders on illegal, this likely makes you a high risk.
Should your marketing and sales tactics be questionable, you’ll probably be deemed as high risk.
The Bottom Line
As previously stated, most merchant account providers are risk averse and they do not wish to cater to any business that could pose a larger threat of losing them money. Therefore, they avoid dealing with those businesses and industries entirely.
If your business falls into this category, you’ll need to find a service provider that is favorable towards working with you and that will offer you fair rates.
High Risk business Types
Below you will find a list of high risk business types. The list is not representative of every industry and there are many more businesses that may be included.
- 1-800 type chat sites
- Airlines
- Amazon, eBay, Google and Yahoo Stores
- Antiques
- Auctions
- Brokering
- Casinos and gambling establishments
- Check cashing services
- Cigarette/ electronic-cigarette vendors
- Collection agencies
- Credit and debt repair
- Credit protection
- Debt collection
- Exporting services (non U.S. based)
- Fantasy sports websites
- Financial planning and advice
- Horoscopes, astrology and psychic services
- Hypnotists or self-hypnosis
- International merchants (non U.S. based)
- International shipping and import/ export
- Investment firms
- Life coaching
- Lingerie sales
- Lotteries
- Magazine sales and subscriptions
- Multi-level marketing (MLM)
- Music, movie, and software downloads (copyrighted materials)
- Prepaid debit cards
- Real estate
- Replica goods sales
- SEO services
- Sports forecasting
- Telecommunications
- Telephone companies
- Time-shares
- Tour operators
- Travel services
- Vacation rentals
- Vitamin and supplement sales
- Weaponry of any nature
What Are High-Risk Merchant Account Fees?
When negotiating with payment processing companies, every company strives to get the most favorable terms of service, low fees and no additional charges. If a company’s business is low-risk, it has all the chances to choose the payment service provider it wants.
Unfortunately, if the risk is high, it is definitely not possible to count on that. It’s important to understand that high risk merchant account fees will definitely be higher than what companies may offer you if your business is low risk.
That doesn’t mean, however, that high risk credit card processing fees will take all the money out of your budget. Today, many firms are trying so hard to adjust to customers and win in the competition that the average high risk merchant account fees have decreased significantly. What’s more, the firm has gained choice. So high risk trading fees should no longer be considered a verdict.
Remember that you can always negotiate with the company on the terms of service that are acceptable to you. It will all depend on how much the firm needs customers and whether it is willing to compromise.
Of course, some companies still refuse high-risk firms, or offer them simply bondage terms of service and the highest fees. Just wish them luck and look for a provider who is interested in your firm and understands that high risk is a problem, but it is also possible to work with such a firm, and quite successfully.
What commission will you have to pay?
You will not find a specific answer to this question in this article, but you can ask it of the firm you are considering as your payment acceptance partner. What is certain is that you will have to pay a higher commission than when opening a standard account. There are no exceptions to the rules, and the question is how much higher the fee will be. In order it will not be disastrous for your business, you need to negotiate and negotiate again, defending the most favorable conditions for yourself. Remember that the company with which you are now talking about opening a high-risk trading account is not the only one on the market, and you can always be offered alternatives that will suit you to the greatest extent.
Don’t forget to discuss such an important issue as the payment scheme, because if your company’s sales volumes are high, it will simply be unprofitable for you to pay high commissions for each transaction.
The most important fees you will pay
The first fee your company will face will be the setup fee. While low-risk firms often don’t pay such a fee, high-risk firms have virtually no such option.
Read the contract before you sign it and ask any questions you may have, because in the future you will have to comply with the terms of the contract even if you failed to read it carefully.
Commission for sales above the limit. The whole point is that providers set limits on the number of transactions for high-risk companies. If these limits are exceeded, you will have to pay an additional commission.
And don’t forget the monthly fee, as well as the fee for each successful transaction. If your firm is characterized as high-risk, you need to immediately forget about the possibility of paying a low fee in both the first and the second case. It’s extremely frustrating to realize, but that’s the reality that high-risk firms face and there’s nothing you can do about it except choose the vendor that offers the most favorable terms of service, even though the risks are high.
If low-risk firms optimize their payment processing costs, high-risk firms will have to spend up to 10% of each sale, which is very costly.
Penalties for chargebacks. Chargebacks are a major problem for a high-risk company. Chargeback requests are detrimental not only to the seller’s company, but also to the processing firm, so you should ask right away what the penalties are for chargebacks so that it does not come as an unpleasant surprise to you later on.