What's the Deal with High Risk Merchant Accounts?
High risk merchant accounts are those that allow potentially "risky" businesses to accept credit card transactions. Since the provider is taking a bigger chance by working with the risky enterprise, it will charge higher rates and fees. This can be frustrating to those in the high-risk category, but it does allow them to do more business than they might otherwise. Therefore, high risk merchant accounts can be the best alternative for some businesses.
Who Uses High Risk Merchant Accounts?
There are various reasons that business owners find themselves in need of high risk merchant accounts. One of the most common causes is the type of business they wish to run. There is actually a rather large list of businesses that are classified as high risk. These may include:
- Adult Web Sites and Products
- Amusement and Other Recreation Services
- Auto Rental
- Bail Bonds
- Buying Clubs or Wholesale Clubs
- Cellular Phones and Pagers
- Check Cashing Services
- Collection Agencies
- Computer Stores
- Credit Repair Businesses
- Credit Interest Rate Reduction
- Custom Products
- Dating Services
- Detective Services
- Door-to-Door Sales
- Escort Services
- Gun Shops
- Hair Restoration Services
- Home Operated Businesses
- Horoscopes and Fortune Tellers
- Internet Pharmaceuticals and Supplements
- Insurance Products
- Investment Opportunities
- Internet Jewelry Sales
- Massage Parlors
- Meat Provisions, Freezer, Lockers
- Mortgage Services and Securities Sales
- Multi-Level Marketing
- Pawn Shops and Coin Shops
- Seminars, Educational
- Software Downloads
- Sports Cards
- Sports Forecasting
- Telecommunications Equipment Sales
- Telemarketing and Phone Solicitation
- Time Share Sales
- Used Auto Sales
- Water Purifiers
- Weight Loss Centers
There are a couple of potential common denominators in these fields. For example, many have a large sales volume with high turnover. Others have demonstrated a higher likelihood of fraud. So, businesses that fall within one of these categories or that operate outside of the U.S. may find themselves in need of high risk merchant accounts.
What to Expect from a High Risk Merchant Account
Of course, high risk merchant accounts are going to require the business to pay much higher rates and fees. The setup fee alone is going to be substantially higher than it would be for a lower risk business. Additionally, the per-transaction fees are going to be extremely high.
It is not uncommon for high risk merchant providers to be located outside of the United States. This can also lead to an increase in fees and rates. First of all, the company experiences extra work in offering credit to "foreign" businesses. Additionally, these companies may not be regulated as heavily as those within the country.
It is also helpful to be aware that even within the high risk arena, some businesses are considered to be more of a gamble than others. These types of businesses will likely face even more fees and higher rates. Not all providers will be willing to set up high risk merchant accounts for every type of business.