What Is A High Risk Merchant Account?
A high risk merchant account is a type of bank account that allows a business to accept credit card payments, even if it operates in an industry that is considered to be high risk. These industries are typically ones that have a higher-than-average rate of chargebacks, fraud, or other types of financial risk.
Some examples of industries that are considered to be high risk include online gaming, adult entertainment, travel, and e-cigarette sales. These businesses may find it difficult to obtain a traditional merchant account, as many banks and credit card processors are hesitant to work with them due to the potential for financial losses.
High risk merchant accounts are typically more expensive to maintain than traditional merchant accounts. This is because the financial institutions that offer them assume a higher level of risk in providing services to high risk businesses. As a result, high risk merchants may be required to pay higher transaction fees, monthly fees, and other costs associated with accepting credit card payments.
Despite the added cost, high risk merchant accounts can be a valuable tool for businesses in high risk industries. They allow these businesses to offer their customers the convenience of paying with credit cards, which can help to increase sales and customer satisfaction.
In order to obtain a high risk merchant account, a business will typically need to provide detailed information about its operations, including its financial history, the products or services it sells, and its target market. The financial institution will then review this information to determine whether or not the business is a good fit for a high risk merchant account.
Overall, a high risk merchant account is a specialized type of bank account that allows high risk businesses to accept credit card payments, despite the potential for financial losses. While these accounts may be more expensive to maintain, they can provide valuable benefits for businesses in high risk industries.
What types of businesses are considered high risk
There are many different types of businesses that are considered high risk. Some examples include:
- Online gaming
- Adult entertainment
- Travel
- E-cigarette sales
- Multi-level marketing
- Pharmaceuticals
- Debt consolidation
- Subscription-based services
- Cannabis
- Nutritional supplements
- High-volume or large ticket sales
- Cryptocurrency
- Telemarketing
- Political campaigns
- Time-shares
- Bail bonds
- Debt collection
- Pawn shops
These industries are considered high risk for a variety of reasons, such as a high rate of chargebacks, fraud, or other financial risks. As a result, businesses in these industries may face challenges in obtaining a traditional merchant account and may need to apply for a high risk merchant account instead.
High risk merchant account vs Low risk merchant account
A high risk merchant account is a type of bank account that allows a business to accept credit card payments, even if it operates in an industry that is considered to be high risk. These industries are typically ones that have a higher-than-average rate of chargebacks, fraud, or other types of financial risk.
In contrast, a low risk merchant account is a type of bank account that is offered to businesses in industries that are considered to be low-risk. These industries typically have a lower rate of chargebacks, fraud, or other financial risks, making them less risky for the financial institution to work with.
One key difference between high-risk and low-risk merchant accounts is the cost. High-risk merchant accounts are typically more expensive to maintain than low-risk ones, as the financial institutions that offer them assume a higher level of risk in providing services to high-risk businesses. As a result, high-risk merchants may be required to pay higher transaction fees, monthly fees, and other costs associated with accepting credit card payments.
Another difference is the level of scrutiny that a business must undergo in order to obtain a merchant account. High-risk businesses may be subject to more extensive underwriting standards and fraud prevention measures, as the financial institution wants to minimize its potential losses. Low-risk businesses, on the other hand, may face fewer requirements and restrictions.
Despite these differences, both high-risk and low-risk merchant accounts serve the same basic purpose: allowing businesses to accept credit card payments from customers. Whether a business is considered high-risk or low-risk will depend on the specific industry it operates in and the potential risks associated with that industry.
Overall, high risk merchant accounts and low-risk merchant accounts are two different types of bank accounts that allow businesses to accept credit card payments. High risk merchant accounts are more expensive and subject to stricter requirements but are necessary for businesses in high-risk industries. Low-risk merchant accounts are less expensive and have fewer requirements, but are only available to businesses in low-risk industries.
Why Do I Need A High Risk Merchant Account:
If you operate a business in a high-risk industry, obtaining a high-risk merchant account is an essential step in being able to accept credit card payments from customers. High-risk industries are typically ones that have a higher-than-average rate of chargebacks, fraud, or other financial risks, which can make it difficult for businesses in these industries to obtain a traditional merchant account.
There are several reasons why you may need a high-risk merchant account, even if your business is in a high-risk industry. These include:
Convenience for customers:
Many customers prefer to pay with credit cards, as it provides a convenient and secure way to make purchases. By obtaining a high-risk merchant account, you can offer your customers the convenience of paying with credit cards, which can help to increase sales and customer satisfaction.
Increased sales:
By offering customers the option to pay with credit cards, you can potentially increase your sales. Credit card payments are often faster and more convenient than other payment methods, which can make it more likely that customers will complete a purchase.
Better cash flow:
Credit card payments are typically processed and deposited into your bank account within a few days, which can help to improve your cash flow. This can be especially beneficial for businesses in high-risk industries, as they may face challenges in obtaining loans or other forms of financing.
Enhanced security:
High-risk merchant accounts often come with advanced security features, such as 3D security and tokenization, which can help to protect your business and your customers against fraud. This can provide peace of mind for both you and your customers and can help to reduce the risk of chargebacks and other financial losses.
Overall, obtaining a high-risk merchant account is an important step for businesses in high-risk industries. It allows these businesses to offer their customers the convenience of paying with credit cards, which can help to increase sales, improve cash flow, and enhance security.
How Do I Get a High-Risk Merchant Account
Obtaining a high-risk merchant account can be a challenging process, as many financial institutions are hesitant to work with businesses in high-risk industries. However, with the right approach and some preparation, it is possible to secure a high-risk merchant account and begin accepting credit card payments.
The first step in getting a high-risk merchant account is to research and compare different financial institutions that offer these accounts. Many banks and credit card processors have specialized divisions that handle high-risk merchant accounts, so it is important to look for one that has experience working with businesses in your industry.
Once you have identified a few potential institutions, the next step is to gather all the necessary information and documentation that will be required to apply for a high-risk merchant account. This may include financial statements, business licenses, and other documents that demonstrate the stability and legitimacy of your business.
Once you have all the necessary information, you can begin the application process. This typically involves filling out an online application form and providing the required documentation to the financial institution. The institution will then review your application and determine whether or not to approve your request for a high-risk merchant account.
If your application is approved, the financial institution will provide you with the necessary tools and equipment to begin accepting credit card payments. This may include a credit card terminal, online payment gateway, or other tools that are specific to your business.
In some cases, the financial institution may require you to meet additional requirements or conditions before your high-risk merchant account is fully activated. These may include implementing additional fraud prevention measures, paying a higher security deposit, or agreeing to higher transaction fees.
Overall, obtaining a high-risk merchant account requires research, preparation, and a willingness to meet the financial institution’s requirements. With the right approach, however, it is possible to secure a high-risk merchant account and begin accepting credit card payments from customers.
But Don’t Worry! ExpoNovum Got You Covered.
ExpoNovum offers high-risk merchant accounts for all types of businesses in high-risk industries.
Our high-risk merchant accounts come with competitive fees and rates, flexible underwriting standards, and robust fraud prevention measures. We also have a dedicated support team that is available to help you with any questions or issues that may arise.
Check out: High Risk Credit Card Processing: The Ultimate Guide 2023
With ExpoNovum, you can securely and successfully accept credit card payments from customers, even if you operate in a high-risk industry. Don’t miss out on the convenience and benefits of accepting credit card payments – get a high-risk merchant account with ExpoNovum today!