High Risk Merchant Accounts: What are they and do you need them?
Meet Joe, who came up with a great idea last summer. He found that most adults would hesitate to enter an adult store to buy some toys or movies for themselves. They are more open to buying online. Not a new idea, by any means, but it was profitable. So he set up a site and started selling things online. He got himself a merchant account to process credit cards and shipped the products to customers. Now, the bigger problem was with the movies. It seemed that husbands didn’t want their wives to know what they had been watching and contested the charges on their credit cards, resulting in chargebacks. Before Joe had managed to make any real headway with his venture, his merchant account was shut down because of the high reversal rates.
Enter High Risk Merchant Accounts
Joe is not any guy in particular. His story is similar to what thousands of enterprising individuals encounter as they go about their ambition of setting up their online business. The problem is, standard merchant account providers don’t like to see chargebacks. This is where High Risk Merchant Accounts come into the picture. As against the low allowed chargeback rates on standard merchant accounts, High Risk accounts can allow as much as a 6% chargeback before they finally shut down your account for good. It is clear that if Joe had applied for a High Risk Merchant Account, his business would have lasted a lot longer and with fewer headaches.
Do you need them?
If yours is any of the high risk businesses listed here, then yes, you need a high risk account. High Risk Merchant Accounts help you carry on with your business without worrying too much about credit card payment reversals. A 6% roof is high enough for almost all businesses. In most cases, you will not even be accepted for a standard account if you run a high risk business.
Aren’t the Fees and Fraud higher?
Not really. First of all, considering you don’t have a choice, the higher fees aren’t that big a deal. At least you get to have your own merchant account and the ability to process credit cards. It’s not like the fees are monstrously high, either. They are usually just a percent or two higher than standard account fees. As for your fear of fraud, High Risk Merchant Account providers have qualified teams to guard against fraud so that you can rest easy.
So that means I can do whatever I want?
No. Getting a High Risk Merchant Account involves a procedure just a thorough as required when obtaining a standard account. You will still need to do your best to lower your risk of chargebacks. Hit 1%, and you get a questing look from your provider. Hit 2%, and you get a notice in your mail. Hit 3-5% and your provider starts really annoying you. 6%, and you can bid adieu to your account.
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