All eCommerce merchants need to set up a payment method for their clients. This payment solution enables a buyer to pay for a product or a subscription service. Understanding High Risk Merchant Accounts
Credit cards are a common method of payment among online consumers and services. And failure to include a credit card processing service indicates rejecting your customers a preferred methods of payment.
For service categorized as high risk, credit card processing becomes high-risk credit card processing. The merchant risk classifications make it harder to get a merchant account.
What Makes a Business Risky?
The following factors may lead to a risky category:
Your company remains in a controlled sector or offers a regulated product like the adult market and tobacco.
The nature of the item you sell or service you offer e.g. electronics, software application,
Your company includes high chargeback liability waiting periods like yearly memberships.
Your industry has a track record of high chargebacks.
Your company is in the MATCH (Member Alert to Control High-Risk) list
These are a few of the most common factors the financial system might describe you as high-risk. Some merchant services providers will turn you down for a list of other reasons.
A High-Risk Credit Card Processor is Your Best Option
If you’ve confirmed your company is labeled as high-risk, it is a better concept to partner with a high-risk charge card processor due to the fact that they understand your requirements much better. A lot of regular processors will decline your application, or charge egregious fees if they onboard your account. Understanding High Risk Merchant Accounts
How High-Risk Processors Differ
Because of the risk involved, payment processing rates for high-risk processors are higher than those of a low-risk processing. Merchants with a high-risk category face harder conditions compared to their low-risk counterparts. Everything is an inconvenience all the way from merchant account application to approval and payment processing.
Additionally, a risky merchant might be requested to set aside a reserve fund. Some processors will retain a lump sum if business records high chargebacks.
What’s a Merchant Reserve Account?
A merchant reserve fund is an emergency fund a processor asks a merchant to place in a separate account as they start processing payments. It can be anything from 5% to 15% of a merchant’s deposits.
The processor keeps this reserve fund for six months, then later allows business access to these financial resources. This fund serves as a security fund or security that the processor keeps back for processing your risky payments.
Banking institutions and payment processors take this step to decrease liability in case of a significant fraud or ask for reverse charges.
Final Thoughts
FinTech merchant accounts provides payment solutions for merchants in high-risk industries. Partner with us to get a fair offer.
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