Before discussing what a high-risk merchant account is, let us first understand what a merchant account is. Sometimes a financial institution such as a bank approves an account that businesses can use to accept from their customers payments through credit or debit cards. What makes the merchant account different from any other account is the level of risk associated with risks involved in the merchant account. Therefore, the reason why many companies are opting for a High-Risk Merchant Account is because of the nature of their business, in terms of risks involved in not only business operations but also in payments. Let us now look at reasons that can lead companies to open these types of accounts with https://highrisk.solutions/.
High Risk Account
There are various reasons that necessitate merchants to be regarded high risk. Firstly, sometimes while taking a personal credit or company, may fail to provide support for the volume of sales applied. Secondly, when a service or product has longer period for chargeback liability, for instance 18 moths, it poses a higher risk. Thirdly, one can be in an industry well known for high-chargebacks. This might disorient you regardless of whether your chargeback thresholds are exceeded. Fourthly, when an account, such as the adult industry, which have “reputational risks”, and lastly, when one is on either TMF or MATCH list.
Categories that constitute high-risk merchant businesses
Businesses that are declared high-risk and require high-risk merchant accounts may include:
· Adult products
· Some online businesses such as electronics
· Dealers in firearms
· Online dating sites
· Bail bonds
· Travel services
· Software downloads
· Debt services, among others
These businesses, however profitable they are, may face difficulties taking payments when they do not have high-risk merchant accounts. Due to high risks, such businesses do not qualify for traditional processing contracts. They are forced to work with processors and acquirers who in turn provide high-risk merchant services because of high-risk payment processor that come with a higher price tag. As long as such businesses show one or more of the following characteristics, then they are high-risk merchant types.
1. When the business has a guarantor, but he/she has a bad personal credit
2. When credit card companies blacklist the business on the TMF or MATCH lists
3. When some banks prohibit products and services a business sells
4. When the business deals in expensive products such as high-end jewelry
5. Industries with a reputation for high chargebacks
6. When a business sells deliverables considered for future. For instance, event tickets or hotel reservations
7. A business that can support chargebacks liability due to possession of high sales volume
8. When a merchant is a member in an entity that high automated recurring billing
Opening a high-risk account
Due to factors mentioned above, it can be difficult for a business to open a high-risk account. The main reason to this reality is that banks and other financial institutions’ policy provide strict guidelines for opening such accounts. Another reason banks may declining approving a high-risk account is that the risks involved may necessitate the merchant (higher than expected) refunds amounts and chargebacks. Therefore, for businesses considered high-risk, keeping on top of chargebacks and preventing them from happening plays the trick.