High-risk Processing
High Risk Merchant Accounts and High Risk Merchant Services
A merchant account for high risk business is similar to a lending account for business owners considered to be high risk. High risk payment processing requires a high risk merchant account. Factors from your credit score to industry type can categorize your business as high risk.
When would I be in need of a high risk merchant account?
It’s important to make sure you understand when you need to and how to get a high risk merchant account for your business. Not understanding the difference or the importance could have a serious negative impact on your business. Several processors will hold funds for up to months at a time, or keep large percentages of your deposits in reserve to mitigate the risk on their side. Most merchants who do fall into this class are unaware of it.
Most common identifiers of a high risk business:
The business is selling products online and doing eCommerce:
Merchants that do processing exclusively online through a shopping cart or website are identified as “Card-Not-Present” merchants.
The business is in a highly regulated industry:
These include businesses such as tobacco, firearms, vaping, alcohol, nutraceuticals, or adult entertainment.
The business industry is known for having a high instance of chargebacks or fraud:
There are some industries where a high rate of chargebacks are a common occurrence. Banks monitor your chargeback ratio to determine risk level by the number transactions you do vs. the amount of chargebacks you get.Businesses selling recurring services, subscription boxes, or online subscriptions:
This type of business sees chargebacks frequently because of customers not remembering they even started a subscription and will opt to chargeback instead of pursue a refund.
The owner establishing the merchant account has bad credit:
This is the most common case scenario and is self-explanatory, but merchants with low credit scores will be identified as high risk by a bank.
How to get approved
It’s not always easy to be approved for high-risk processing accounts. You need to have the right provider, and they need to be partnered with the right bank. Otherwise you’ll have constant issues with held funds and large deposit reservers. Luckily El Punto Agency’s specialized risk department is here to help you get your account approved and processing quickly!
To get your account approved smoothly it’s best to follow these practices:
Have bank statements, processing statements, and business information ready at the time of account submission. Showing a history of stability will greatly improve your odds of approval.
Be honest. Is your credit low because of a divorce or some other life circumstance that has passed and you’re still trying to improve it? Or did you have a prior bankruptcy due to such circumstances. Tell us up front, lying about it on the application, then discovering it later in the background check will immediately disqualify the account.
Have processes established for active fraud protection and chargeback protections. Have a clear return/refund policy for your online products to prevent chargebacks before they happen.
Be patient. Our risk team is doing everything they can to get you approved in a best-case scenario with lower rates, minimal hold times, and no reserves. This can take time and negotiation between our teams and the bank. Your diligence will be rewarded!
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