There’s no way to get around it. If you want to succeed in business today, especially if you’re in e-commerce, you need to give your customers the option to pay with their card.
Unfortunately, credit card processors don’t treat all businesses equally. Smaller, low volume merchants tend to get hit with higher fees but sometimes aren’t approved at all and deemed “a high-risk merchant”.
If your credit card processor considers your business to be a high risk, it can have serious consequences.
In this article, we’ll break down what it means to be a high-risk merchant and how to determine if you fall into this category or not. We’ll even tell you what you can do to turn it around.
What’s a High-Risk Merchant?
A high-risk merchant is a term credit card processors use to label a business that operates in risk or that’s considered a liability.
They determine this label by a variety of factors from their niche, personal credit, and business operations. A high-risk merchant likely describes a business that has a high risk of chargebacks, fraud, or large ticket items.
If your credit card processor deemed your business a “high risk”, they can either deny you entirely or charge you astronomically high rates and fees and strict contract terms.
Let’s find out if this applies to your business.
Are You One of Them?
Remember, that just because one processor considers you high risk, doesn’t mean another won’t. Let’s go over the criteria that some processors may deem “high risk”.
High Chargebacks and Fraud: While you may be operating legally if your business niche doesn’t have the squeakiest of reputations, that may pose a problem for your merchant account. Don’t worry, this reflects your customers, not you personally.
Your processor may still approve you as a high-risk merchant but beware of high fees, especially when chargebacks occur. They may also put you on a monitoring program to regularly audit how you’re doing as a merchant.
You have bad credit: Unfortunately for some, you are a reflection of your business. If you don’t show the credit card processor that you’re responsible with your finances, they might not trust your business acumen either.
Offshore Accounts: If you registered your business in another country yet most of your customers are from the US, this may raise red flags as it could indicate potential fraud.
Borderline Legal Products: Industries that sell pornography, drug paraphernalia, and gambling sights are the best examples of these types of businesses.
Sounds Fishy: Again, you might be operating a perfectly legal multi-level marketing scheme, but if your business is often associated with a scam, you might just be guilty by association.
High Ticket Items: With high ticket items, come high risk–something that we know credit card processors don’t want. This is why you shouldn’t be too surprised to see furniture sales, B2B services, and real estate on the list for high-risk businesses.
Common Businesses Considered High Risk
Curious as to what business niches are most often deemed high risk? Read on.
- Antiques, collectibles
- Businesses related to the sex industry: escort/companion/dating services, 1-800 chat sites, pornography, adult toys, lingerie adult movies, and books, etc
- Drug paraphernalia
- eBay/Amazon stores
- Furniture sales
- Gambling, betting, casinos, fantasy leagues
- ‘Get Rich Quick’ schemes
- Life coaching, wellness programs
- Psychic, astrology, hypnotism sites
- Real estate businesses
- Software downloads
- Travel and vacation agencies
- Vitamins and supplements
- Weapons and self-defense (including parts and accessories)
Please note that this is not the full list, simply some of the more popular niches that credit card processors often consider high risk.
Boost Your Chances
Just because you’re a high-risk merchant doesn’t mean they’ll deny you, although it’s within their rights.
Often if they accept you as a high-risk merchant account, they’ll sign you with a stricter contract and potentially high fees to protect themselves from any future liability.
Here are some things you can do to help your chances.
Highlight Your Best Features
In the cover letter of your application, be sure to note all the best things about your business.
Provide them with relevant information on your business, employees, and sales. Address any concerns with proactive solutions you’ve taken such as fraud monitoring or customer pre-screening.
Ideally, you want to reduce the threat of losing them money. If they think you’re too big of a liability, they won’t accept you.
Note Your High Trading Volumes
High trading volume impacts the credit card processor’s risk so be sure to mention that. If you have a low rate of chargebacks, no reports of fraud, and a long history of sales proving that money moves legally through your business, show it off.
It’s these kinds of things that will likely approve your application.
Go with a Merchant Account
If you already know you’re a high-risk merchant with no chance of approval (or maybe you’ve been previously denied) don’t worry. Your business is not dead. There’s still hope for you.
Thankfully, there are credit card processors that cater specifically to high-risk merchants, although there are costs associated with them.
Did We Just Describe Your Business? Take Your Next Step
Did your heart sink reading this article as you realized that you’re a high-risk merchant? Don’t worry. You’ve got options.
At High-Risk Solutions, we understand the frustration of being a “high-risk merchant,” and we’re here to help. We provide low-cost, high-risk credit card processing services to companies who need it the most.
Check out our services and let’s get you set up a high-risk merchant account today.