Running an online business with a higher risk is not an easy task. What is even more difficult is finding a high risk merchant account to process credit card transactions. If you are considering opening a high-risk merchant account and are looking for more information, you have come to the right place. This guide provides you with all the information you need to open a merchant account for high risk. Learn everything about a high risk merchant service by going through this guide.
When it comes to opening a high risk merchant account, you have to find an acquiring bank that agrees to underwrite your business. Since not many banks are willing to underwrite businesses that have a high risk, it is best to look around for high risk merchant services. There is bound to be a reliable service provider that offers high risk merchant account instant approval.
So What Is A High Risk Merchant Account?
In the simplest of words, a high risk merchant account is an account that is used for payment processing by businesses that are considered to be high risk by banks. Since high risk businesses are more likely to experience chargebacks, they have to pay higher fees for the merchant services. It is possible for the bank to place a rolling reserve on the account if a business has a high potential for charge charges or a history which shows many refunds and chargebacks. The rolling reserve consists of money which is used to provide cover in case of fraud or chargebacks. To better understand a high risk merchant account, it is important to first understand what makes a high risk merchant.
What Is A High Risk Merchant?
A high risk merchant is a business that has more chargebacks and is considered to have a higher risk. Hence, processing history and industry reputation are given great consideration. Generally, it is recommended for businesses to maintain their chargeback ratio at less than 0.9 percent of total transactions. The following characteristics are observed in a high risk merchant.
- Sales volume of over $20,000.
- Average credit card transactions amounting more than $500.
- Excessive chargebacks and bad credit history.
- The business sells goods and services to countries that are notorious for high levels of fraud.
Who Requires A High Risk Merchant Account?
There are certain types of businesses that are considered high risk. Hence, they require a high risk merchant account to operate. An example of a high risk business includes a travel agent since the travel industry is known for cancellations. This results in more refunds and customers applying for chargebacks. Other businesses include adult-themed websites, forex trading, gaming, and even gambling to name a few. In addition to these, nightclubs, airlines, online adult membership sites, offshore corporations, matchmaker services, health products, and pawn shops require an offshore high risk merchant account. Therefore, a merchant account for high risk business is needed to accept credit card payments.
High Risk Merchant Account Fees
Whether you want to open a gaming merchant account, an online gaming merchant account, or forex merchant account, it is crucial that you know about the different types of account fees before you get started. As you might have already gotten an idea by now, high risk merchant accounts cost a lot more than a low risk business account. There are certain costs that you will need to pay to continue operations.
Now, it is important that you know that high fees associates with high risk merchant accounts were set many years ago and you should have no trouble finding payment processors who offer competitive rates. The dated approach involved commission rates of 15 percent or more. As the competition has gotten tough, you get to benefit as a high risk business owner. You no longer need to stick to long contract that runs for up to 5 years. Open your forex trading merchant account while adhering better terms and conditions.
Before you sign any contract, you should bear in mind that there are still some high risk payment providers who continue to charge a PCI fee, annual fee, and setup fee. There might even be an early termination fee when closing your account before the date as set out in the contract. Make sure to read the contract carefully as the termination fee will be included in it. As the payment processing industry has come a long way, you should look for high risk payment processors who charge only on transactions that occur on your app or website.
Rolling Reserve for High Risk Merchants
As mentioned earlier, what makes high risk merchant accounts unique is that they all have a rolling reserve. It provides an additional layer of protection to the bank against unexpected activities like fraud and chargebacks. Therefore, a certain part of the processed volume of the credit card would be secured. It could be anywhere from 5 percent to 10 percent depending on the processed volume and your business model. The amount is kept for a specific period of time, usually for 6 months to a year after which it is released. Generally, the higher the risk involved the higher the rolling reserve.
Chargeback fees are fees which cardholders file for when there is a dispute with the amount of money charged by the business. It covers administrative costs for processing chargebacks. High risk merchant account fees tend to be double the amount that low risk merchants pay. However, if your business processes multiple transactions daily, it is possible to negotiate the rates with your payment processor.
How Can You Apply for a High Risk Merchant Account?
Now that you know about what is a high risk merchant account and the different fees involved, chances are that you are wondering how you can apply for one. To get a high risk merchant account, all you need to do is complete the application online. Moreover, you also need to find a reputable high risk payment processor to accept all the card payments.
Besides the hefty fees, applying for a high risk merchant account is quite simple and easy. It barely takes up a lot of time. For example, if you select Octapay as your payment partner, the company will find a bank that perfectly matches all your needs. Once the acquiring bank has approved your business, you should have no trouble processing payments online or on your smartphone. When applying for a high risk merchant account, the following are required.
- Incorporation Certificate.
- Shareholder Certificate (If Any).
- Organizational Structure Chart.
- Copy of identification documents and utility bill indicating the office address.
- Processing history of the past 6 months covering chargeback percentage, number of transactions, and total volume.
- User credentials.
- Prepare the website to meet website compliance requirements.
What Is Next?
Once you have applied to open a high risk merchant account, be prepared for due diligence by the risk management department who will decide if your business if your business even qualifies for the high risk merchant or not. It will also be checked whether the business is on the TMF (Terminated Merchant List) list or not.
In addition to the above, your credit card processing history would be thoroughly reviewed based on the acceptable chargeback threshold. Thus if your history consists of incidents of fraud, is considered not good enough, or has a high chargeback ratio, it would be difficult for you to get a high risk merchant account. Remember, payment platforms follow a case by case approach.
Pros of High Risk Merchant Account
- Global Coverage: One of the best things about a high risk merchant account is that you benefit from global coverage. Thus, you get to grow your business as a high risk merchant by accepting transactions in various currencies and selling to clients that reside in countries that are considered high risk. It means that you would gain access to a bigger market.
- High Chargeback Protection: Another reason why high risk merchant accounts are amazing is because they allow you to keep your account in good shape. For example, when merchants with regular accounts cross the chargeback threshold, their account might end up getting terminated. On the other hand, a high risk merchant account would simply continue to operate without having to close the account. However, it does not mean that one should neglect chargeback management.
- Expand the Business: When you have a high risk merchant account, you get to sell products or services which are otherwise not allowed to low risk merchant accounts. Therefore, you get to benefit from more opportunities.
- Increased Profits: Since you would benefit from wider possibilities of products, you would also get to grow your chances of making more money.
Cons of High Risk Merchant Account
- Higher Fees and Processing Rates: A common disadvantage of having a high risk merchant account is that you would be required to pay higher fees as well as processing rates. However, with greater risk comes greater reward.
- Difficult to Find the Right Plan: Another disadvantage of high risk merchant accounts is that it can be difficult to find the right plan. But, with many options available, it should not be as difficult as it used to be in the past.
Which High Risk Merchant Service Should You Use?
To help you save time, it is best that you use Octapay. The company provides everything that you could possibly need, from an easy to use system to high-quality service to favourable payment terms and more. You can never go wrong with Octapay. The company offers unique payment services which are especially designed for the online gaming industry and forex industry. You can a business in just about any sphere without having to worry about anything with Octapay. The company takes care of everything so that you can focus on what you do best and that is making money. It offers the following payment solutions.
- Forex Payment Solutions
If you are interested in Forex, Octapay has got you covered. Now, you can open a merchant account with favourable terms in record time as the company is experienced in offering the best Forex brokerage payment solutions in the market. Octapay is aware of all the unique aspects of the business sector and goes out of its way to ensure that all your needs are met. Not only does the company provide excellent client service, competitive pricing, and choice, but also exceeds all your expectations. Any Forex broker can benefit from efficient, secure, and easy to use service with Octapay. Collect payments from your clients and more.
- Crypto Payment Solutions
Keeping in view of the fact that cryptocurrencies are the future, Octapay also offers crypto payment solutions to its valued clients. Be among the makers of this emerging digital economy by opting for a crypto payment solution. With Octapay, you can accept payment in Bitcoin or any other cryptocurrency without having to deal with high fees and chargebacks. Now, you can simply focus on gaining new customers. From setup to settlement, everything is taken care of. Octapay offers embedded invoices for your site, multiple integration options, a hosted checkout, payment buttons, and more.
- Other Payment Solutions
Are you looking for any other payment solution? Octapay is also here to help you with that. Ditch frustrating high risk processing solutions for one that is painless. Regardless of the type of business you run, you can get a new high risk merchant account setup with Octapay. Existing businesses can also contact the company for state of the art security, new equipment, and better rates. Thus, you get to benefit from a proper merchant account to take your business to the next level.
Once you have gone over this post, you will know everything there is to high risk merchant services. Make sure to use a reliable service provider like Octapay for the best experience.