Are you running an online business and looking to process credit card transactions? What if your business has a higher risk of chargebacks? In this case, you need a high-risk merchant account for that matter. But what is a high-risk merchant account, anyway?
Understanding high-risk merchant accounts
Businesses having a high-risk to the banks need to use a high-risk merchant account. This is a payment processing account for businesses that are prone to chargebacks. As a high-risk business, it is necessary to pay for higher fees for merchant services.
That is because banks may put a rolling reserve on your account, particularly if a business has a high potential of chargebacks or with a history that shows many chargebacks and refunds.
A rolling reserve is the amount of money that will cover the possibility of fraud or chargebacks.
Purpose of high-risk merchant account
High-risk businesses like the travel industry have different factors that may cause cancellations. This will usually result to a number of refunds and customers filing chargebacks. Other high-risk businesses are adult-themed websites, forex trading, and gambling.
If you are in a similar high-risk business, you can have a high-risk merchant account so that you can accept credit card payments on your website. In this case, you have to deal with higher costs compared to regular merchants.
Pros of high-risk merchant account
- Global coverage
One of the advantages as a high-risk merchant is that you can grow your business performance by accepting transactions in multiple currencies. You can also sell to clients over to low-risk countries. This way, you can access larger markets.
- Protection against high chargeback
When you are protected against chargeback, you can have bigger chances of keeping your merchant account in good shape.
- Business expansion
Having a high-risk merchant account, you can sell products and services not allowed on a low-risk merchant account. This will give you more opportunities for long-term growth.
- Increased profits
You will have wider possibilities of products you can sell, while growing your chances of earning more money.
Cons of high-risk merchant account
- Higher fees and processing rates
Having a high-risk merchant account means that you have to pay higher fees and processing rates.
- Require a rolling reserve
Banks might put a rolling reserve on your account to cover for any chargeback or fraud because of the higher risk involved.
High-risk merchant services providers
If you have been identified as a high-risk merchant, you need a merchant services provider to handle the job for you. Therefore, you have to take your time, look for options, and explore the high-risk merchant services provider to work best with your business.
- Visit the website
- Read independent reviews of the services provided
- Explore the reputation of the provider when dealing with merchants like you
- Read the contract with an attorney so that you can determine if it is suitable for your business
Overall, as a modern business owner, it is very convenient for your customers to have the ability to accept and process credit cards, debit cards, and gift cards, among others. It is vital to find alternatives ways to process payments online.
But if your business has a high risk as determined by the merchant account service providers, it is important to know what category of business you are in to confirm if you really are a high-risk merchant or not.