Cash represented only 30% of all transactions in 2019. That number is likely to be lower since more people turned to shop online in 2020.
If you want to survive as a business, you need to be able to process credit card transactions. Yet, there are many businesses that can’t because they’re considered high-risk merchants.
The only lifeline for these businesses is high-risk merchant accounts. Read on to learn what these accounts are, if you need them, and how to get them.
What Are High-Risk Merchant Accounts?
The high-risk merchant account definition is a business that operates in an industry where there’s a lot of fraud or chargebacks.
The creation of high-risk merchants is designed to protect banks. They’re the intermediaries in credit card transactions.
When fraud and chargebacks are prevalent, banks lose money on the transactions. They have to refund customers or reimburse fraudulent charges.
High-risk merchant accounts make it much harder for fly-by-night businesses to open payment processing accounts.
It also puts a big burden on legitimate businesses. They often have to pay higher processing fees and go through a tough application process.
It’s not impossible to open high-risk merchant accounts, though it’s more challenging than just signing up for a service like PayPal or Stripe.
Am I a High-Risk Business?
It depends on the payment processing company.
You will definitely be a high-risk business if you are in the adult, dating, and gambling industries. These industries are well-known for high levels of fraud and the use of stolen credit cards.
Moderate-risk businesses include travel, furniture, gyms, health and wellness products, phone services, and direct sales. These industries have a high level of chargebacks.
There are companies that won’t do business with any type of high-risk business.
Other payment processing companies consider adult and gambling sites to be high risk. Yet, they’ll work with travel agents and furniture companies.
How to Get a High-Risk Merchant Account
Is it that hard to open a high-risk merchant account? It’s not when you find a reputable high-risk payment processing company. Another factor is how long you’ve been in business.
High-risk payment processors want to make sure they do business with businesses that have staying power.
According to Payment Savvy, you need to have proper documentation to open a high-risk merchant account.
The required documents vary from one vendor to the next. You usually need to fill out an application and provide financial statements to show that you have a profitable business.
Accept Credit Card Payments With High-Risk Merchant Accounts
You know that you have to be able to accept credit card payments. That might be an issue if you’re considered a high-risk business.
You shouldn’t fear losing business because there are high-risk merchant accounts that you can work with. These payment processors are willing to work with your business when others aren’t.
Do you need more business advice? Head over to the Finance section of this site for more tips.
