Here is all you need to know about high-risk merchant accounts

When your business sells online, it is only logical that you’ll have to accept payments from customers over the internet too. To facilitate the process of payment acceptance, you’ll have to team up with a payment processing company.

But before these companies agree to deal with you, they’ll first examine the nature of your merchant to determine the class it falls into – whether high-risk or low-risk.

Generally speaking, low-risk merchants are those businesses that are perceived by payment processors to carry minimal to zero-risk factors, while high-risk merchants are those businesses they fear have huge potential to be defrauded.

As a result, most payment processors refuse to work with high-risk merchants, while those that do charge them higher fees and offer them neck-cracking contracts. However, that’s not to say that high-risk merchants don’t come about payment processors who’re willing to shoulder their risks at decent fees.

In fact, by conducting extensive research, many of them do. And a good example of a company that many of them use is – a credit card payment processing company and a high-risk merchant account facilitator.

Examples of high-risk merchants

Before a merchant business can be labeled as high-risk, the processor must have considered the industry they belong to, as well as their sales methods, amid several other factors. Historically, the industries below are amongst the commonest ones to be categorized as high-risk because of their chargeback rates.

Casinos, gambling, and gaming

Attorneys, bail bonding services

Adult and dating platforms

Pharmaceuticals and online drug providers

Telemarketing, VoIP, and calling cards

Travel, accommodations, and ticketing

Subscription services like gym, child care, mentoring, magazines, etc.

Debt collection and credit repair

Challenges of high-risk merchant accounts

Being labeled a high-risk merchant is just a tip of the iceberg; wait till you reach out to most processors to make a contract with them. You’ll be surprised at the number of challenges you’ll have to beat to finally secure a deal.

That said, here are some of the likely challenges you’ll be confronted with:

Excessive fees and charges

By the time you finally find a processor willing to help you, their fees might be too hefty for you to work with. So, you won’t have a choice but to walk away, hoping to try another. But you’ll be surprised that the fee of the next processor might even be more outrageous than that of the former.

In a nutshell, you might spend months searching for a willing processor and still find nothing.

Scam processors

You’re not the only one who knows about the travail of high-risk merchants. Even scammers do too. As such, many of them look to take advantage of desperate merchants by offering them cut-throat deals, and jaw-dropping contract offers.

In the end, they will either defraud the merchant or steal valuable customer information as customers are trying to make purchases on the merchant’s website. To prevent yourself from falling victim to them, be sure to research extensively the processor you’re dealing with before striking any deal with them.

Revenue-limiting reserves

In further attempts to safeguard their interests, most willing processors might ask for a revenue-limiting reserve to protect their investment in case something terrible happens with your merchant business. Typically, this can be in the form of an up-front reserve, a rolling reserve, or a fixed (capped) reserve.

On the bright side, though, most high-risk merchants face limited chargeback penalties, meaning that in the event of excessive chargebacks, your account won’t be closed by the provider.

Where to find an affordable high-risk processor

As earlier mentioned, that your industry is considered high-risk doesn’t necessarily mean that you won’t find a processor to work with. Far from it! The only catch is that you’ll have to search and search before you find one that’s good enough.

The good news?

We’ve done the heavy lifting for you, so you don’t have to waste your time searching for a trusted high-risk payment processor or merchant account provider.

The award-winning credit card processor iPayTotal is one of such companies. They offer flexible accounts (that can be tailored to your business needs), easy set-up, and competitive pricing. Thanks to their awesome relationships with a great number of local and international financial institutions, they’re able to offer exceptional service to their clients worldwide. In addition, they also offer PCI compliant solutions – including payment gateways. And work with all major credit, debit, and prepaid cards.