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How a High-Risk Merchant Account Works

How a High-Risk Merchant Account Works

What is a high-risk merchant account? A high-risk merchant account is an account that provides credit card processing for businesses that are deemed to be at higher risk compared to other businesses. Examples of high-risk businesses include firearms dealers, subscription box services, pharmaceutical stores, and airlines. Nevertheless, high-risk merchant accounts will allow these merchants to accept Visa and MasterCard transactions through various types of equipment.

What Are the Implications of a High-Risk Merchant Account?

For persons or businesses with a high-risk merchant account, there are some implications. Some of them include the following:

  • A larger deposit than normal merchant accounts
  • High-risk merchants have stricter qualifications for approval since they are riskier than merchants with regular accounts.
  • High-risk merchant accounts will require a higher percentage of monthly revenue from transactions that take place on credit cards
  • The fees for high-risk processing can be more expensive than those for regular accounts
  • High-risk merchant accounts will incur an annual fee for the service
  • High-risk merchant accounts will retain more of the transaction amount than regular credit card processing

Since the risks are so much higher, there is a greater chance of loss of funds.

The Difference between How Low-Risk and High-Risk Merchant Accounts Work

One of the main differences between a low-risk and high-risk merchant account is that for a high-risk merchant, there will be an increased chance of chargebacks. Chargebacks occur when your customers dispute credit card transactions with their banks or financial institutions.

Another difference is that you cannot send in applications to get approved for a high risk merchant account. There are no application forms to fill out. You will be approved through a phone call or email, and then your processing company will set up the account for you. However, depending upon your industry and location, you may be able to fill out an application for a high-risk merchant account online.

There is an annual fee associated with having high-risk merchant services. Regular credit card processing does not require such payments. The percentage of revenue that each transaction will retain is also different.

With high-risk merchant accounts comes a bit more risk than regular credit card processing. Still, it can be beneficial for certain businesses that need to accept Visa and MasterCard transactions.

Who is Eligible for a High-Risk Account?

There are some specific requirements for eligibility. Generally, all businesses that can accept Visa and MasterCard transactions will apply for a high-risk merchant account. However, other factors are also involved in the process.

First of all, you must have a valid business license and the appropriate zoning permit to operate in your area.

The minimum revenue requirements depend on what type of high-risk merchant account you want for your business. For example, a different amount is needed if you plan to use mobile credit card processing or terminals placed at various locations in your store. The requirements for eligibility will vary based on the needs of your business and what kind of high-risk merchant services you plan to use.

What Are the Fees Associated with a High-Risk Merchant Account?

There are many fees associated with high-risk merchant services. The first is the monthly fee, which may be waived if you have a hefty deposit in your account. In addition to that, there will also be an application fee and a setup fee for each credit card processing terminal or device that you plan to use at various locations within your store.

There are also some fees for accepting credit cards through mobile devices, including a monthly fee and transaction fees. Processing rates will differ depending on the type of high-risk merchant account you have.

Some accounts may come with interchange-plus pricing, while others will be tiered or cost per transaction. There are many different types of fees associated with high-risk merchant services, and the amount of each will vary depending on your specific account.

In summary, a high-risk merchant account is a type of credit card processing account that allows you to accept Visa and MasterCard transactions. It has certain benefits, such as the ability for your business to take those types of cards. However, it also comes with several charges depending on what kind of services you need.


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by Amy Sloane //

Opinions expressed by contributors are their own.