High Risk Merchant Account

Why are some merchant accounts considered high risk?

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Why was your business classified as high risk?

If you've looked into online payment processing, you will certainly have come across the term "high risk merchant account". Keep reading to learn more about the nature of risks involved and to better understand the business of credit and debit card processing.

Who exactly is at risk?

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

The provider will settle the captured sales to the merchant's bank account, but cardholders can still ask for their money back many months after this. The provider is therefore at risk in case of disputes and merchant not being able to repay the possible negative balance. Business types and other differing factors determine the risk scale and possibility of this scenario occurring. The provider needs to be sure that products or services are delivered by the merchant to all clients in a timely manner so that all parties are satisfied. In essence, this is what is meant by a high risk merchant account - when the payment provider finds your business particularly 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 a risky business venture, could be all clear for others, so be sure to check your options. However with every provider there are standard guidelines adhered to when assessing how risky your are for them. The main reasons you may be 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 give out refunds frequently, payments companies 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 lengthy, something could go wrong making your business a risk for the provider.
  • Industry Reputation: If the industry is known for having high ratio of dissatisfaction, fraudulent transactions or being targeted by fraudsters?
  • Credit Score: If your credit score is too low you may be given a high risk status, mainly because it will be harder for your to repay any negative balance.
  • MOTO Transactions: If your business takes transactions over the phone (through a virtual terminal), without the card being physically present or having a client make a purchase in person, there is a higher chance that the cardholder is unaware of all details.
  • Brand New Business: Evidence of previous credit card processing is reassuring to payment processors since it lets them know that your business will be profitable as it has been in the past. As a new business, however, you don't have any credit card processing history, which automatically renders 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 for a merchant who was terminated in the past.
  • High volume: If your business processing lots of transactions, the overall financial risks are higher and there is a greater risk that thieves will attempt to take data or credit card details.

These are a few reasons that could explain why your business is high-risk. It’s essential that you find a provider that is willing to work with you and your business. MerchantScout's team of experts will work closely with you to find the best possible solution. CONTACT US and we will openly and honestly assess your high-risk business and help you secure a long-term merchant account solution.

What to Expect?

There isn't much of a difference between a regular merchant account and a high-risk account. The only variation is that the terms of pay-out and pricing may be slightly in favour of the provider. You may find it difficult to find a provider who will accept your business. Be careful to read and consider the terms and rates with a high-risk account, as they will be stricter 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 looking to exploit your business. Check for hidden fees and termination terms, and keep in mind that many high-risk processors will want a higher rolling reserve and will settle to your bank account very late. MerchantScout’s team of experts team has over 10 years of experience working with many well-established banks and processors around the world, providing merchants with the very best merchant account solutions.

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 previous processing agreements terminated. Providers use the system to screen applicants, looking for any history of termination in the past.

How Did I Get MATCH(ed)?

There are numerous reasons why your company may be on the MATCH list. Information remains 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 provides high-risk merchant accounts without the hassle! We arrange rates as low as 1.4% through solid and safe solutions, no matter where your business is geographically located.

With a network of over 40 payment providers and tested acquiring banks, we enable your business to obtain a merchant facility and reach all potential customers! We know your business is important to you. That's why it's important to us.

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