Merchant accounts are needed in order for a business to accept credit card payments. As a merchant, there are two places you can obtain a merchant account; a bank, or a third party provider. For online merchants the most popular, plus most cases cost effective, source is from a third party merchant account organization.
A high risk merchant account is required by businesses that, when compared together with ‘traditional’ goods/services business, are at a higher risk of:
High quantity of sales
High rate of refunds
High rate of charge-backs
Other reasons a merchant may be categorized as a high risk are:
Merchants Location – Some merchant account providers will not accept merchants from certain countries.
The Product/Service the merchant sells is unlawful in some jurisdictions.
Merchant Credit report – Some providers won’t accept merchants with poor or no credit history.
Due towards high risk classification, most banks will not provide your free account to those who are in a high-risk industry (such as adult entertainment, replica goods, pharmacy merchant account payment gateway etc). Therefore some third party providers offer their services to both general merchants and precarious merchants.
Merchant account providers that are developed to service high-risk merchants will probably provide the next step of fraud protection, so that you can decrease charge their merchants incur. However, in order to cover the higher level of risk, rates high risk merchant account will continually be higher than their lower risk counter-parts.
When purchasing a high risk merchant account, there are several factors to be take note. Rates will be one of the most important factors, as well as includes fees for refunds and charge-backs, along with transaction fees, the discount rate and recurring fees. Require need to adopt fraud protection, customer service and reporting available to you as a merchant.