What Is a High-Risk Merchant Account?

You probably didn’t know this, but certain industries are labeled high-risk by merchants due to various reasons. For example, the firearms and alcohol industry is high-risk because they are ‘vice’ businesses. Adult entertainment falls into this category as well.

Recently, CBD, MLM, and Adult/Dating have been added to this list as well. Not only that but depending on the state of your company finances, even if you don’t dabble in firearms or alcohol, you could be labeled a high-risk business. 

Keep reading to find out more about how you can get financial help as a high-risk business. 

What Makes a Business High-risk?

Each payment processor, financial institution, and payment service provider has its own definition of what makes a business high-risk. But in essence, if there’s a greater risk of fraud or chargebacks when dealing with credit card payments, then the business is considered high-risk. 

Some companies will say outright that they won’t approve businesses in certain industries. And others have an open-door policy for all industries, no matter what. 

You will want to do some shopping around if you are in a high-risk industry or have been labeled high-risk due to your tumultuous business finances. 

How Does a High-risk Account Differ From a Regular One?

You should know that even if you get approved for a high-risk merchant account, this doesn’t mean that you are in the all-clear. Unfortunately, high-risk accounts have to run through a lot of additional loops. 

Longer Application Process

You will need to be patient when applying to a high-risk merchant account since it takes much longer for it to get approved. Regular business accounts take minutes to get approved and you can start using them right away.

Not so with high-risk merchant accounts. These will take days to get approved and you will need to provide a lot more information to the institution to get this kind of account approved. You might even get your personal credit checked during the approval process. 

Higher Processing and Chargeback Fees

Even though actual fees will vary depending on the company, you can expect to pay higher processing and chargeback fees for a high-risk merchant account. You will want to account for these additional charges on your monthly budget for proper financial management. 

The fees can get quite exorbitant at times. For example, chargeback fees can be as high as $100 each!

This is just the price you pay for getting labeled as a high-risk business by merchants. 

Volume Caps

Unfortunately, you might be limited in the volume or dollar amount of transactions you can perform each month. This will get delineated in your upfront contract, and there will be very little room for negotiation. 

That’s why it’s important to choose a high risk payment gateway that can help you reduce these charges. Shop around!

Additional Requirements

With CBD or alcohol sales online, you will have to jump through additional hoops to get a high-risk merchant account. This includes having tools in place to check the DOBs of website visitors to ensure they aren’t below the age of majority.

A lot of websites will ask you if you are 21 years or older to enter their website in the United States. This isn’t just to annoy customers but is required by law and by the business’ high-risk merchant account.

Get Approved for a High-risk Merchant Account

Even though it might look like it’s almost impossible to get a high-risk merchant account, that’s not so. There are certain steps you can take to get approved for a high-risk merchant account. These are:

Don’t Fib on the Application Process

It’s important to be honest during the application process. The more transparent you can be during this process, the more likely it is that your application will get approved. 

Cash Reserves Help Your Cause

If you are looking to do a high number of monthly transactions and the volume is going to be high as well, make sure you have at least 25 to 50% of this volume sitting in cash in your bank account. This will help your application process go smoothly.

Compile Documentation

Each vendor will ask for different documentation during the application process. But having 3-6 months of bank account statements and a few years of tax returns will greatly help your cause. 

Don’t wait until they ask you for these documents. Have them at hand and present them from the get-go. This should ensure your application process doesn’t get delayed as they go back and forth with you waiting for documents and such. 

Reduce Chargebacks

Sometimes the reason you have so many chargebacks from customers isn’t that you are being targeted by some nefarious forces. But it could be because you aren’t being clear enough with your customers and aren’t communicating your return policy or other details properly. 

Set up a clear FAQ section on your website and have a Live Chat option so customers can quickly ask you any questions they might have about their purchases or returns, before going to their credit card merchant and complaining. 

Ask the Merchant for Help

You are not a payment gateway or merchant account expert. So there’s no need to pretend to be one. Ask your merchant or vendor questions about how to get your account approved faster and they will be able to give you some financial help in this regard. 

Terrible Company Finances? – Get a High-risk Merchant Account Approved

No matter what financial mistakes you have made in the past, and how dire your company finances look, you can still get approved for a high-risk merchant account. Follow the tips laid out above and make sure to keep honest and open communication going with your vendor. 

Also, read through related articles on our website to keep learning about other Business Products & Services.

Last Updated on March 2, 2023

Usama BIN Safdar
Meet Usama Bin Safdar, a wordsmith hailing from Faisalabad, Pakistan. With over 5 years of experience under his belt, he's a master at weaving words to create content that's not only informative but also engaging. He's a deep-diver when it comes to SEO, and as the Founder of SoftwareBench, he helps businesses and individuals navigate the digital landscape with ease. Follow Usama for a journey into the world of SEO and digital marketing, where every word is crafted with precision and passion.

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