High risk businesses can be challenging to secure a merchant account for. But with the right approach and resources, you can successfully secure an excellent merchant account for your business.
Credit card processing companies are notoriously risk-averse. Fraud and chargebacks are their top concerns. You can know about clover pos from Best Merchant Services.
High Chargeback Rates
If your chargeback ratio is high, it could make getting a merchant account more challenging. That is why it is always beneficial to do your due diligence when searching for a payment processing partner.
It is essential to recognize that merchant accounts can be expensive, so you should attempt to negotiate lower processing rates and account fees. While these costs will vary based on your business’ risk level, you can do your best to minimize them as much as possible.
Additionally, you should explore negotiating for larger reserves, rolling reserve agreements and other risk minimization strategies. Doing so can help you save unnecessary costs and time in the long run.
Be mindful that certain industries can be considered high-risk – such as online dating, auctions, adult entertainment, gaming sites and telemarketing businesses. Banks typically avoid working with these types of businesses due to their high failure rate and potential hazards they pose.
High Volume
A high volume merchant account is the ideal way for your business to process transactions. These accounts come with processing limits that protect both the business and credit card issuing bank from fraudulent activity and chargebacks.
Many providers will set monthly average transaction limits that are based on factors like credit scores and fraud ratios. Businesses that exceed these limits run the risk of their accounts being frozen or shut down, potentially leading to lost revenue and sales.
Alternatively, a high risk merchant account provider can create a rolling reserve that withholds 5-10% of your transactions for an agreed upon period to cover chargebacks. This could come in handy if you’ve had a difficult financial year and require an account to stay open until things improve.
When applying for a high risk merchant account, it’s essential that you be open with your bank and payment processor about any financial difficulties you have had in the past. Doing this will allow them to gain insight into your business operations and increase the chances of approval.
Low Credit Score
No matter if you are just starting out or an established merchant, having a bad credit score can make it difficult to be approved for a merchant account. Fortunately, there are ways to improve your credit and find a provider who will allow payment processing.
A low credit score can be caused by missed or late payments, irresponsible financial partners, and other issues beyond your control. To improve your prospects for merchant accounts in the future, it’s essential to clear up any past bankruptcies, liens and other negative accounts.
The good news is that there are many established merchant account providers who work with businesses with bad credit. These firms specialize in helping you improve your credit, minimize chargebacks and fraud, and put your business back in a stronger position for growth.
A good credit score is the foundation of a successful business and an effective way to protect your investment. It also helps you avoid high processing fees and other restrictions that could hinder growth in your company.
High Risk Industry
Businesses operating in highly risky industries or whose operations could potentially collapse often face difficulty securing merchant accounts. Examples include adult entertainment, e-cigarette vendors, gambling and gaming operations, as well as certain subscription-based e-commerce models.
High-risk industries tend to experience an increased number of chargebacks. This is because customers who refuse to pay for their purchases may dispute them with a credit card company.
This can be a serious problem for your business. It could even result in the termination of your merchant account with an acquiring bank, leading to significant financial loss.
