Wednesday, September 18th, 2019
Being a business owner is tough. Between adhering to industry regulations, managing staff, and overseeing all of your finances, it can feel like no one’s looking out for your best interests. This is especially true if your company has been categorized as a high risk merchant.
Profitable businesses with dependable reputations and great credit scores are turned down everyday by traditional banks for merchant processing. If you’ve been denied, you may be wondering what exactly that means and where to go from here.
Don’t worry. You’re not alone, and there are still options to help your business fulfill its needs.
What Is a High Risk Merchant Account?
There are a few attributes that lead banks to label a business a high risk merchant. Your business might have one or more of these qualities.
- Have no brick-and-mortar stores
- Deemed likely to go bankrupt before being able to pay back loans
- Operating outside of the United States
- In an industry known for fraud or chargebacks
Some of these industries include gambling sites, online dating, adult entertainment, telemarketers, web-hosting services, and medical marijuana.
High Risk Means More Terms
To mitigate risk, the processor will typically provide certain caveats to their terms for processing, including:
- Higher processing fees
- Account fees
- Extended contracts, typically three years or longer
- Auto renewal clauses
- Early termination fees
- Additional security measures, such as CVV2 verification
- Rolling reserves
Rolling reserves refers to money set aside from your proceeds to cover unexpected expenses, such as chargebacks, and to help buffer your account in the event that you go out of business. If you are a long standing company, you may be able to decrease the reserved amount.
While additional security features might seem like a hassle, they’re actually a benefit for your company.
What to Look For in a Merchant Processor
So, the bank turned you down, where do you go now? It’s time to do some research. There are many reputable companies out there that specialize in high risk merchant accounts.
When deciding which merchant processor is best for you, keep the following in mind:
- Available plans with terms that you can agree to
- Check the fine print for hidden fees
- Potential incentives for maintaining a good record
How to Improve You High Risk Merchant Standing
It might seem like an uphill climb now but proving your mettle as a merchant is possible. Working to reduce chargebacks, earning consistent profits over the long term, and continuing to uphold your good reputation can all work towards lessening the negative impacts of being a high risk merchant.
Topics discussed in this article:
- high risk merchant account