High-risk merchants don’t have a track record
If you’re running a business in a high-risk industry, you may be worried about chargebacks and fraudulent activity. Many of these types of businesses offer gray-area products and are therefore out of the reach of most traditional financial service providers. In these cases, specialized merchant services can help you overcome these problems.
High-risk merchants are companies with a poor track record, a low credit score, or certain liabilities. When assessing a business’s risk, payment processors look at several factors, including the type of industry and the company’s financial and operational history. Chargeback rates and volume also play an important role in determining a high-risk status.
There are a few different types of merchant accounts available to high-risk businesses. Some of them offer instant approval, while others offer a slow review. While a high-risk business may not qualify for instant approval, the approval process can be as quick as a day or two. However, it can take up to three weeks to receive final approval.
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They process high volumes of transactions
High-risk merchants have a higher risk of chargebacks than typical merchants. Moreover, a high-risk merchant must set aside 5% of their average monthly transaction as a chargeback. In addition, a high-risk merchant will pay a higher monthly processing fee. However, high-risk merchants can reduce chargeback losses by accepting credit cards.
A high-risk merchant account will usually require a different fee structure than a typical merchant account. These types of accounts will have a monthly or annual fee and may have additional fees for processing transactions through your website or mobile app. In addition, the processing history of high-risk merchants will be different from the average merchant.
If you’re a high-risk merchant, you need to choose a processing company that specializes in high-risk businesses. Patriot Bankcard is a US-based company that specializes in high-risk industries. It offers both US-based and offshore merchant accounts.
They pay higher fees
If you’re a high-risk merchant, you’re likely paying higher fees than your average business. Payment processors usually charge a percentage or flat fee in addition to their interchange rate. While the percentages charged may seem high at first glance, they’re actually a way to mitigate the risk.
To obtain a high-risk merchant account, high-risk merchants must undergo extensive due diligence by risk management experts. In addition, their credit card processing history must meet acceptable chargeback thresholds. Those with poor credit histories may find it difficult to qualify for a high-risk merchant account.
Many industries, including high-risk businesses, have a higher risk of chargebacks. These include “get-rich-quick” programs and books, as well as sales of replica handbags, wallets, and watches. Other high-risk businesses include self-defense and the self-defense industry. Since these businesses typically have higher chargeback rates, high-risk merchants pay higher processing fees.
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They sign longer contracts
High-risk merchants are often subject to higher processing fees and may be required to sign longer contracts with payment processors. Moreover, they may be required to pay a higher chargeback rate. Therefore, they must make sure they choose an account provider with exceptional service standards and 24-hour customer support.
Typical terms for high-risk merchants include longer contract lengths, higher chargeback fees, and early termination fees. However, these fees can vary depending on the acquiring bank and payment provider. High-risk merchants should also expect to pay higher annual fees. It’s a good idea to understand how these fees impact your business’s cash flow before signing a long-term contract.
