High Risk Merchant Account

Why are some merchant accounts considered high risk?


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If you've looked into online payment processing, you surely came across a term "high risk merchant account". Keep reading to learn more about the risks involved and to better understand the business of credit card processing.

Who exactly is at risk?

The acquirer or payment provider will settle all processed sales (minus fees) typically within couple of days or a week after they took place. But here comes the twist - every cardholder has the right to dispute a transaction within 180 days after it took place, simply by contacting their card issuing bank and filing a complaint of non-delivery or dissatisfaction for example. In case of longer service length this means 180 days after service has been fully provided/completed, which further extends the time window for chargebacks to take place.

So on one hand the provider will settle the captured sales to the merchant's bank account, but on the other hand there's still many months after that when cardholders can ask for their money back. Therefore the provider is at risk in case of disputes and then merchant not being able to repay the possible negative balance. Business types and different factors determine the risk scale and possibility of this scenario occuring. The provider needs to be sure the products or services are delivered by merchant to all clients in timely manner and that everyone will be happy basically. So that's when we start speaking about a high risk merchant account - when the provider finds your business to be more risky for them.

There are a variety of reasons why this can occur.

Why are you High Risk?

There are a number of different reasons your business could be considered high risk, and, of course, there are always different views on what is considered a risk for a particular acquiring bank or payment provider. What some consider to be a risky business venture, others could be more eased with, so be sure to check your options. However with every provider there are some standard guidelines they take when assessing how risky your are for them. Main reasons you were given a high risk merchant account are: 

  • History of chargebacks: This is when the issuing bank initiates the return of funds to the cardholder based on their complaint/dispute.
  • Returns: If your business tends to have many refunds, providers may assume that you, the merchant, are doing something wrong and grant your business a high-risk status.
  • Delivery: If the timeframe for delivering your product or service to the consumer is too far into the future, something could go wrong making your business a risk for the provider.
  • Industry Reputation: Is the industry known for having high ratio of dissatisfaction, fraudulent transactions or being attacked by thieves?
  • Credit Score: If your credit score isn't the best, it could be the reason you were given a high-risk status, mainly becasue it will be harder for your to repay any negative balance.
  • MOTO Transactions: If your business takes transaction over the phone (through a virtual terminal), without the card physically present or client making a purchase by themselves, there is a higher chance the transaction is completed without cardholder being fully aware of all details.
  • Brand New Business: Histories of previous credit card processing is reassuring to providers since it lets them know that your business will be profitable since it has been in the past. But as a new business, you don't have any credit card processing history, making your business an uncertain risk.
  • Automated Billing: With automated billing there is the potential that the consumer could dispute the charge, not remembering they signed up for your business.
  • MATCH listing: Abbreviation for the MasterCard Alert of merchant who was terminated in the past.
  • High volume: If your business is getting high traffic, the overall financial risks are higher and there is a greater risk that thieves will take data or credit card details.

These are just a few reasons that could explain why your business is high risk. But, regardless, it is best if you find a provider that is willing to work with you and your business. MerchantScout's team of experts will work with you closely to find the best possible solution. CONTACT US and we will take an honest interest in your high-risk business and help you get the merchant account solution you will keep for years. 

What to Expect?

There isn't much of a difference between a regular merchant account and a high risk account. They are same thing practically speaking, only the terms of payout and pricing may be slightly in favor of the provider. You may find it more difficult to find a provider who will accept your business. And, you should be careful to read and consider the terms and rates with a high-risk account, as they will be more strict than a typical merchant account.

What Can You Do?

Be sure you read your contract thoroughly. Unfortunately there are still several unethical high-risk payment providers around the world, waiting for you to fall into their trap. Check for hideen fees, termination terms, and keep in mind that many high-risk processors will want a higher rolling reserve and settle to your bank account very late. Applying for a merchant solution through MerchantScout gives you an advantage as our team has over 10 years of experience, the period in which we've had the chance to work with many banks and processors around the world, keeping partnerships only with solid well tested partners.

What Are High Risk Industries?

Typical high risk business categories are:

  • Adult Dating
  • Auto Rental
  • Bitcoin
  • Escort Services
  • Drug Stores
  • Pharmacy
  • Electronics
  • Travel
  • Gaming
  • Gambling
  • Tobacco
  • Insurance
  • Infomercials
  • Multi-Level Marketing
  • Ticketing Agencies
  • Nutraceutical
  • Software
  • Telemarketing
  • Financial Services
  • Jewelry

Does your business fall into any of these categories?

MATCH Listing

Also referred to as the TMF, Terminated Merchant File, MATCH is a system created and managed by MasterCard. The database houses information about businesses who have had their processing agreement terminated. Providers use the system to screen applicants, looking for any history of termination in the past.

How Did I Get MATCH(ed)?

The reasons behind why your company is on the MATCH list are numerous. Unfortunately, your information is going to remain in the MATCH system for at least five years.

Some reasons for getting put on the list include:

  • Excessive Chargebacks
  • Unapproved Products, Services, URLs
  • Laundering
  • Common Point of Purchase
  • Violating Standards
  • Fraud Conviction
  • Bankruptcy

Why MerchantScout?

MerchantScout can provide you with the high risk merchant account you need without the hassle! We arrange rates as low as 1.4%, through solid & safe solutions no matter where your business is geographically.

With over 150 processing currencies, and over 30 payment methods to choose from, your business can reach out to all potential customers! We know your business is important to you, that's why it's important to us.

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