05:57
Faizan
In this day and age accepting credit cards as a form of payment for your business is an absolute must. For the average retail business it is as easy as calling a merchant bank and requesting a merchant account. However, some businesses are classified as "High Risk" by processing institutions and are much more difficult to get a merchant account for and are typically more expensive.
A high risk merchant is any merchant that has very poor credit and/or owns a business that operates in an industry that is known for having higher than average charge-backs and a higher chance of transactions being fraudulent. A few good examples of businesses that would be considered "High Risk" are as follows.
Online Gambling Institutions
Adult Services
Casinos
Nutraceutical Suppliers (Supplements)
Travel Agencies
Subscription Based Businesses
Most merchant banks advertising that they specialize in High Risk merchant placement do so simply because there is a higher profit margin to be made on processing rates. The higher the risk a business poses to a merchant bank the more money the bank will want to make before agreeing to processing payments on behalf of the business. It is not uncommon to see rates in excess of 5% with high monthly fees.
The reason that processing banks are hard on businesses that are considered high risk is simple. If a business fails to meet its obligation to provide its customers with a service or if a business goes bankrupt and a customer demands their funds be returned to them then the merchant bank is obligated to refund the customer out of their own pocket. All of the risks associated with processing payments is absorbed by the bank itself and the bank wants to be compensated accordingly.
Q: So what options does a High Risk business have?
A: A business owner always has the option of not accepting credit cards as a form of payment. Unfortunately, as stated earlier in this article accepting credit cards as a form of payment is a must in order for business to flourish. If you do not have the ability to accept a credit card a customer is likely to just go to one of your competitors. A more feasible option is to choose a merchant bank that is smaller than a national chain bank simply because their overhead is typically lower and are they are willing to accept higher risks with smaller royalties than larger banks.
A high risk merchant is any merchant that has very poor credit and/or owns a business that operates in an industry that is known for having higher than average charge-backs and a higher chance of transactions being fraudulent. A few good examples of businesses that would be considered "High Risk" are as follows.
Online Gambling Institutions
Adult Services
Casinos
Nutraceutical Suppliers (Supplements)
Travel Agencies
Subscription Based Businesses
Most merchant banks advertising that they specialize in High Risk merchant placement do so simply because there is a higher profit margin to be made on processing rates. The higher the risk a business poses to a merchant bank the more money the bank will want to make before agreeing to processing payments on behalf of the business. It is not uncommon to see rates in excess of 5% with high monthly fees.
The reason that processing banks are hard on businesses that are considered high risk is simple. If a business fails to meet its obligation to provide its customers with a service or if a business goes bankrupt and a customer demands their funds be returned to them then the merchant bank is obligated to refund the customer out of their own pocket. All of the risks associated with processing payments is absorbed by the bank itself and the bank wants to be compensated accordingly.
Q: So what options does a High Risk business have?
A: A business owner always has the option of not accepting credit cards as a form of payment. Unfortunately, as stated earlier in this article accepting credit cards as a form of payment is a must in order for business to flourish. If you do not have the ability to accept a credit card a customer is likely to just go to one of your competitors. A more feasible option is to choose a merchant bank that is smaller than a national chain bank simply because their overhead is typically lower and are they are willing to accept higher risks with smaller royalties than larger banks.
Posted in: business
