What Makes a Merchant Account High Risk?

Few businesses today can thrive without an effective method of payment processing. It doesn’t matter if your business operates solely online or if you’re a brick and mortar business in a small town, cash is no longer king where customers are concerned, and you need to be able to accept multiple alternative payments to keep up with the demands of your buying public.

But being identified as a high-risk account for merchant services can throw a monkey wrench in your plans to accept credit cards and other forms of payment.

What Factors Make Your Business “High Risk”?

When it comes to merchant accounts and the risk you pose to payment processors, there are some risks that make your business stand out. Any one of the following could identify your business as a greater risk.

Industry, Location, and Clientele

Some industries represent a greater risk than others. Some from the nature of the business and others based solely on the reputation of the business. For instance, stores that offer adult products are just as likely to be rated as high-risk enterprises as those who deal with firearms. The same holds true for travel services, telemarketers, bail bonds businesses, online auctions, and dating websites.

Businesses that Never Actually See the Card

Companies that operate mostly using card-not-present transactions are at greater risk of fraud and chargebacks. This includes online business, home-based businesses, online dating sites, online auctions, and a variety of other businesses conducted over the world wide web. Even businesses that offer real products but manage the payment processing for the products online.

Reputation for Abundant Chargebacks

If you’ve experienced a huge number of chargebacks in the past, whether by mistakes made in the payment processing, a bad batch of products, or any number of other possible reasons, you could find that you’ve been identified as a high-risk merchant account and need to work a little harder to prove yourself in the future.

Poor Personal Credit

While it may not seem fair, your personal credit has some bearing on the standing of your business when it comes to merchant service accounts and the exposure of risk various processors feel your business represents. One of the best things you can do for the financial sake of your business, not to mention to reduce your status as a high-risk merchant account, is to build up your own credit score. This may involve reducing your available credit ratio, paying off old debts, or working with a financial planner to get your personal credit back on track for the sake of securing better credit for your business.

Company Financials and Merchant Account History

The other thing you need to know is how how to avoid getting a high risk merchant label in the future by managing your account wisely today. This means avoid getting an account that provides more services than your business needs at the moment and staying up to date with all requirements of the merchant service provider you’re currently working with.

How Long You’ve Been in Business

This is one that has a greater impact than many business owners realize. Newer businesses often need to prove themselves before they’ll receive preferred rates and status designations from payment processors and other merchant services providers. The longer you’re in business, the less risk many providers feel you pose.

Designation as a high-risk merchant account is not the end of the world for your business. It doesn’t mean you can’t accept credit cards or that you’ll never be able to do so. What it does mean is that you might need to endure a greater amount of scrutiny, higher fees, and a few other less pleasant ramifications.

Consider working with a trusted merchant service provider like Zenti for your payment processing and other business needs. We understand that you are more than numbers on a page and work with you to ensure you’re getting the high-risk merchant account services you need without paying extra for unwanted and unneeded services. We also believe in offering complete transparency, so you’re not surprised with unexpected or complex fee structures. Contact us today to learn how we can help your business, regardless of risk, on a month-to-month agreement with no long-term commitment.