In the credit card processing industry, a high risk account (merchant) often is not easy to set up. Many processors do not want to take the risk. It’s interesting that some high risk merchants do not even know they are considered high risk. These are not companies you would ever expect to be categorized as risky. Much of the time they are very main stream businesses.
Determining whether your company is high risk is not as difficult as it seems.
Essentially any business that sells product or service now that doesn’t get delivered until a future date will be considered high risk.
An example of a high risk merchant would be an airline. You purchase your ticket in advance but may not be flying for a few months. The flight could get cancelled or the airline could go out of business. The reason it is considered high risk is based on the likelihood of chargebacks. The airline is not always responsible or willing to pay the customer back, should there be an issue with the purchased flight. If a customer refutes a charge and wins the chargeback and the airline does not or will not pay it back, it is the responsibility of the processor to pay the consumer. Many processors do not want to take that risk.
Another variable of being considered high risk is the nature of the business. If you are in a business that is questionable in terms of legality or ethics, you are automatically considered a high risk account.
High risk accounts tend to have higher rates than main stream businesses. In many cases a domestic merchant account is not obtainable so it is necessary to go offshore where the criteria are different. However, this can also lead to higher rates and charges.
Unfortunately, if you are a high risk account there is not much room for maneuver. . The best option is to find a processor that will accommodate your needs and find you many different outlets to process. This way if you ever get shut down from processing, you will be up and running within a few days. It is not uncommon for a processor to shut down a high risk account with very little notice. You must be fully prepared at all times and have a few different backup plans for when you get shut down.
When you sign a contract with a high risk processor, look for several different parameters. The first is fees, many of which will be hidden. Make sure to also look for termination fees. These can be unusually high. Unfortunately, unethical high risk processors are the rule, rather than the exception. . It’s important to do your research and to know what you are getting into from the beginning. Always have a second pair of eyes read your statements. Many processors will claim you are paying a certain percentage, yet with so many hidden fees’ you are actually going to be paying a lot more. In the high risk credit card processing sector, what you don’t know can in fact harm you… greatly!