The risk of fraud is directly proportional to sales in a business. So, you need superior security, usually provided by high-risk credit card processors. Although it is challenging to find, it makes your business payments smooth.
A high-risk credit card processor is vital for almost everyone with high sales. However, for high-risk merchants, it becomes extremely vital. Through this article, you will learn about high-risk merchants, high risk credit card processing, its pros and cons.
High-Risk Merchant
Before understanding the concept of high risk credit card processing, it is vital to know about high risk merchants.
If you need to process a credit card payment, but your business ( online or offline) has higher risks of chargebacks, you might need a high risk merchant account. These accounts are claimed to be highly risky for banks.
Since banks are at the other end of any payment process, they have the right to decide about the group of merchants they want to work with. There are certain characteristics based on which the payment processing card association categorizes your industry and company as risky. And if your company falls under this, you require high risk credit card processing.
But the question is, what are those characteristics that make an account a high-risk merchant account. Some of these factors are obvious, while some are not easily noticeable until an underwriter marks them. You will know about these factors through subsequent sections.
Factors Responsible for High-Risk Merchant Account
Understanding these factors will help you to decide whether you require high risk credit card processing or not. Some of the characteristics are:
- High Chargeback Rates
If your business poses a high risk of acquiring excessive chargebacks or reverse charges ( requested by not satisfied consumers), the bank might mark your account as high risk.
- Managing Risky Products
Another reason that might categorize your business as a high-risk account is the materials you sell. Managing highly regulated products like cannabis, e-cigarettes, and adult entertainment might welcome a high-risk account label.
- High Fraud Risks
Some businesses that attract a high risk of fraud fall under the category of high-risk merchant accounts.
- Bad Personal Credit
If the account history shows your irresponsible personal credit, banks might label your account as highly risky.
- High-Ticket Sales
If the amount you receive from one sale is high, the chargeback cost will also become high. Thus, the bank labels your account as a high-risk account.
- Running an Offshore Company
If you operate a business out of the country, the bank marks it as a high-risk merchant account because it is challenging to monitor and guarantee full compliance.
To summarize these criteria, here is a table that differentiates a high-risk and low-risk merchant account.
| Factor | High-Risk Account | Low-Risk Account |
| Average monthly sales volume | Over $20,000 | Less than $20,000 |
| Average credit card transaction | Over $500 | Less than $500 |
| Currencies Accepted | Multiple | Low |
| Offer subscription (recurring) payments | Yes | No |
| History of excessive chargebacks/ Placed on the MATCH list | Yes | No |
| Products offered | High-risk ones, such as e-cigarettes, adult entertainment, and cannabis, seasonal items, digital, software, tickets, etc. | Low-risk ones, such as office supplies, books, home goods, clothing, etc. |
| Selling products to a high-risk country, such as the EU, Canada, Australia, Japan, and the US | Yes | No |
So, these are the differences between high-risk and low-risk accounts. Here is another list of businesses that are most likely to fall under a high-risk merchant account.
| Airplanes or airline tickets | Collection agencies | Annual Contracts |
| Pornographic and sexually oriented materials, such as adult telephone conversations, online adult membership, adult toys or paraphernalia, companion or escort services, and matchmaking services | Any weapons, such as guns, knives, ammo, stun guns. It also includes any weapon parts, such as triggers, butts, or magazines. | Supplements sales, such as prescription pills, diet pills, pharmacy products, health supplements |
| Antiques | Pawn Shops | VoIP services |
| Astrology, horoscope, fortune tellers, or psychic services. | SEO Services | Merchants with bad credit |
| Self-hypnosis services or hypnotists | Illegal or banned services and products | Real estate |
| Sports betting or sports forecasting | Brokering | Cargo, international shipping, export/ import |
| Continuity based billing or subscription | Check cashing services | Web development and technical support |
| Sweepstakes or Lotteries | Collectible currency, coins, or autographed | Extended warranty companies |
| Medical care program | Debt repair services, counseling, credit protection | Furniture sellers |
| Merchant on MATCH or Terminated merchant file List | E-Books | Loan modification, financial consulting, and finance brokers services |
| Talent or Modeling List | Event ticket brokers | Multi-Level Marketing ( MLM) |
| Software uploads, movies, music, or software downloads | Indirect financial consulting | Electronics |
| Tour operators | Financial advising, strategy, or planning | Life coaching |
Beyond these, various other industries are usually listed under high-risk merchant accounts. Most merchants fear being listed under the list because of following reasons:
- Low acceptance rates and Stringent underwriting procedures.
- Merchant accounts have to pay higher fees for payment processing services.
- Merchant accounts might suffer sudden termination if any slip-up happens.
But these risks should not stop you from opting for a high risk credit card processor. It offers various benefits. The next section deals with it.
Benefits of High-Risk Payment Processing
Undoubtedly, falling under the high-risk category is irritating mainly because of frequent rejection from Merchant Account Instant Approval providers. However, despite this high risk, there are certain high-risk payment processors ready to handle your account. It offers various benefits:
- Advanced Security
If you are more dependent on online payments, there is a high risk of fraud. Also, people avoid paying online without a strong security base. However, if you use high-risk payment processors, the risks significantly decrease.
These payment processors offer multi-layered security. This protection promotes customer satisfaction and ultimately good sales.
- Increase Revenues
Most businesses that require high-risk processors are dependent on recurring payments. They also depend on large transactions to maintain their profile. For such businesses, high-risk processors make it easy to retain customers. Besides these, other benefits are massive global growth and rapid customer verification.
Conclusion
So, now you know high-risk payment processing and how a processor can help you with it. However, while selecting your processor, make sure they offer good security, they have experts in their groups, their pricing is transparent, offers flexibility, and check their business model. All this will ensure that you are free from cybercriminals and other payment-related risks.
