Am I Considered A High Risk Merchant?

Apr 24, 2024 | High Risk

If you process credit cards you have most likely heard the term “high-risk”. Some business types are considered high-risk in the credit card processing industry for many different reasons and as a result of this, high-risk businesses are often turned down for merchant accounts and in some cases shut off from processing payments entirely.  It’s important for business owners to understand if they are in a high-risk industry. A high-risk merchant account is more necessary than you might think.

What Are High Risk Businesses?

Am I Considered High RiskHigh risk businesses are online or brick-and-mortar companies that sell products in unique verticals. Typically have very high discount rates and large security reserves. A merchant is usually classified as high-risk if the industry has a higher risk of fraud and chargebacks. The two highest-risk accounts are adult material or pornography and online gambling. Both industries require high risk merchant accounts.

There are many other businesses classified as moderate risk. While traditionally viewed as high risk, these businesses don’t qualify for a regular account, although credit card processing fees will still be higher.

The most common high-risk merchants include:

  • Phone services, particularly prepaid phone cards
  • Multi-level marketing and direct sales
  • Travel accommodations, airfare, or packages
  • Discount memberships or gym memberships
  • Software downloads
  • Health and wellness products
  • Electronic cigarettes
  • Credit repair services
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What Is A High Risk Merchant Account?

If you run an online store and are wondering, what is high risk merchant account? Then you already know how important payment processing and may have found yourself in a unique situation. Stripe or Square has strict regulations for high risk businesses. Accordingly, companies with regulatory concerns or brand conflicts aren’t allowed according to their Terms and Conditions. CBD, Vape, Adult stores, and businesses with unique verticals fall into this category. Looking for a payment gateway solutions and a high risk merchant account is easier than you think.

High-Risk Credit Card Processing

It’s important to understand that high risk credit card processing is important to find if you want to have an e-commerce store in a qualified vertical. What one credit card processing provider considers high-risk, another may view as acceptable. This is based on each company’s underwriting guidelines. Merchants who offer high-risk services or products should consider a provider that specializes in high-risk industries.

Getting Approved

High-risk merchants increase their approval rates by highlighting the best features of their business. A cover letter should include relevant information, such as the industry insight of people involved in the project. Merchants should also discuss anything that makes the business stand out, such as proactive fraud monitoring.

Address high trading volumes in a cover letter. Trading volumes impact the risk to the processing company. Showing a strong processing history with a great deal of money moving through the business can increase the chance of approval.

Finally, high-risk merchants should have a plan to address long fulfillment duration. Fulfillment duration refers to the amount of time it takes between when payment collection and product delivery. The longer the fulfillment duration, the higher the risk of chargebacks, and thus the riskier the business. Lastly, custom accounts hedge risk when it comes to chargebacks. If you have to extend your fulfillment duration because of situations outside of your control, you may face customer complaints and chargebacks. Not to worry, high risk merchant accounts have increased allowances for these unpredictable events.