What is merchant account?
A business account in which the financial institution allows the account holder to accept payment through online money transactions using credit/debit card is called a merchant account.
What is high-risk merchant account?
The merchant account with a high risk like frauds in transactions is considered as a High Risk Merchant Account. When such risks the involved the merchant bank charges high premium and also charge extra fees for their services and card networks charge to try and minimize the risk involved.
When are you high-risk merchant?
Following are the few possibilities when your account is considered a High-Risk merchant account:
1. If you start a brand new business, there is no previous online transaction processing history.
2. The reputation of the business, if the business is anytime previously known for dissatisfaction of costumers, transaction frauds, etc.
3. Low Credit Score, you are considered a high risk merchant if your credit score is low as there are possibilities that you find it hard to repay your negative balance.
4. Service Provision, if in case there frequently is a lengthy time span for your business to provide proper service or deliver a product to the costumer, your business may be categorized as high-risk.
5. Transactions over phone, if your business uses a virtual medium for transactions this causes the costumer not being aware of details.
Along with all these there are a few more criteria’s of getting a status of high-risk merchant account, like- Chargeback History, Frequent refunds, Automated Billing, etc.
Which type of businesses are included in High-Risk Status?
Following is the list of High-Risk Merchant Consideration-
1. Adult Entertainment
2. High Volume Transactions
4. Travel and Lodging
6. Marketing through network
7. Firearms and so on
How to avoid?
There are chances depending on the reputation on your account, the account may get freezes for a short span or permanently in which you cannot have any transactions in this account.
The best way to avoid all these problems is to be completely upfront and honest in the Merchant Account Application about the services and products you will provide the customers through your business.