There are a few industry standards that classify a merchant account as a high risk. A wider group of businesses falls in the grey area because they do not have definitive guidelines if they are what is considered a high-risk business. It is, therefore, worth calling several processors or asking contacts in the industry about their perception of your products and services. Finally, prepare yourself with the necessary paperwork and the understanding that you will pay extra fees than non-risk merchant accounts.
Costs of high-risk businesses
Are you considered a high-risk merchant? It is recommendable for you to adopt realistic expectations of the business’s proceedings. One overwhelming fact is these businesses will often pay more than their counterparts. Unfortunately, you will be paying a considerably high cost to receive the same services as low-risk businesses. Some of these charges include the following penalties:
- High account fees
- High processing fees
- Early termination fees
- Increased chargeback fees
- Transaction limits
- Rolling reserve requirements that
- Limited cash flow
- Long contract requirement with automatic renewal and yearly increments
Best attributes of a merchant account for high-risk business
Fortunately, a high-risk merchant account is not only about gloom. The benefits of using these accounts outweigh the challenges.
Managing the chargebacks
Chargeback laws are creations that protect the consumer’s vulnerability against fraudulent businesses. One of the essential strategies you can employ is to find legal ways of reducing the fee.
Nine of every ten chargebacks fall into the friendly fraud category, also known as non-threatening chargebacks. The variation between a traditional merchant account and a high risk merchant account is that the traditional one monitors the lowest chargeback fees. Banks follow the ratio between the chargeback and the transaction to verify if it surpasses the one percent threshold.
A traditional account with a chargeback of more than the set threshold is bound to experience sudden termination by the acquirer. The business stands the risk of going out of business, ending its procession of credit cards, or seeking a high risk merchant account.
Contrastingly, even a merchant account with bad credit rarely faces termination due to excessive chargebacks. The merchant may pay higher fines to cater to the set business dealings.
There is a lengthy list of products and services that credit card networks cut off due to their dicey nature. The attribute of the product will, however, seem normal to processors when the merchant uses a high risk account.
High-risk processors can allow the procession of more than $20,000 and offer recurrent payment modules. They also accept credit card transactions that exceed $500 for one card, hence enable buyers to make more purchases in a short timeframe.
Many merchants in ecommerce find that the pros of high-risk credit card processing outweigh the cons. Normal processors impose rules that limit the credit card’s processions and the merchant’s attempts at global operations. Examples of these limits include the following:
- Limits against using multiple currencies
- Selling to clients in Canada, Japan, Australia, and Europe
- Handling no-card-presence transactions
A high risk merchant account by Fintech will grant you enough powers for your business and growth plan. We wi give you a detailed explanation of each account's top qualities so you can create a feasible plan for yourself.
High Risk Merchant Account
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