If your business has already been identified as high risk, you might be aware of the difficulties you are going to face while approaching a decent merchant account provider. The probability of a risky business getting rejected by regular banks and processors is high. In fact, if your business deals with products and services like CBD Oil, Forex, Online dating, Adult content, Gambling, etc then you may as well forget about acquiring a regular merchant account.
This leads to businesses then opting for the next best choice – High Risk Merchant Account Solutions. A high risk merchant account is mostly similar to a regular merchant account with the most notable exception being, the rates associated with the former.
When approaching a processor for a merchant account, you may either get outright rejected or your high risk business will be charged higher than what is charged for any other regular business.
Why, then, are High Risk Merchant Account rates so high?
The simple reason why you are charged higher than regular is because of the risky nature of the business you operate. A merchant account is essentially a credit given to you by your processor. When a customer purchases an item and makes the payment, the bank or acquirer deposits the amount to your merchant account and collects it from the customer’s card at a later date. This means a merchant has access to funds before the payment is actually made by the customer.
Now, after the funds are deposited into the merchant account and when the payment is collected from the cardholder, a lot can go down in between like frauds or chargebacks which puts the processor at a risk. High Risk businesses especially are notorious for racking high chargebacks.
In such cases, processors will obviously look after their interests first to try and avoid any chances of losses. Hence, merchant account providers raise their rates to balance out the risk posed by your business. This is why high risk merchant accounts are so expensive.
While finding a merchant account for high risk business might prove to be a task, you still have the power to negotiate before settling for the right one. Always do your research and ask questions to a merchant account provider. Read the terms and conditions of your contract before signing on the dotted lines and check for any unnecessary hidden fees. Go for a high risk merchant account that fulfills all your requirements at a fair rate.