High risk merchant services are business with high risk of financial crime. These may include adult entertainment, mental health services, drug paraphernalia stores, gun shops, credit repair or payday loan businesses. High risk merchant accounts often have higher rates and fees than standard merchant accounts.
Why would a high risk merchant account be required?
There can be a number of reasons why someone would need a high risk merchant account. For example, adult entertainment merchants will obviously require this type of account; as will gun shops and drug paraphernalia stores. The requirements for opening such an account are very different from those required to open a standard business account and many times the application process is more rigorous.
What are the requirements for high risk merchant accounts?
High risk merchant accounts are typically more expensive than standard business accounts. As such, there are certain requirements that must be met before one of these accounts can be opened, including:
- A minimum monthly transaction volume of $3,000 – this amount varies depending on the merchant account provider
- Proof of creditworthiness is required, this can be evidenced by the following: Business bank statements. Current business loans. Current business lines of credit. Ownership of at least 25% of the company (mid-sized businesses only) Sufficient net worth.
There are many other requirements that must be met before a high risk merchant account provider will agree to work with you. These are explained in more detail on this page, Requirements for high risk merchant accounts .
What are the fees involved in a high risk merchant account?
High risk merchant accounts can be up to five times more expensive than standard business accounts. They usually come with interchange plus pricing, rather than interchange pass through. The rate for high risk accounts can be as much as 3.4% + $0.20, which is similar to the fees involved with standard business merchant services of 2.3%.
There are other costs related to using a high risk merchant account, these include setup fees and regular monthly charges. These are explained in more detail on this page, High risk merchant account fees .
What are the benefits of high risk merchant services?
High risk merchants can benefit from the convenience of accepting credit cards. This type of payment method is known for being speedy and easy – which can be very beneficial for your business. Unlike other funding options, such as cheques and wire transfers, you can receive money from an online credit card transaction within a few days.
High risk merchant accounts can also provide you with additional services, such as employee fraud screening. As high risk financial crimes are more common among employees of the business, this type of service could help to protect your company from losses or other issues that may arise due to fraudulent activity. Many providers offer these types of screenings for free.
What are the issues involved with accepting high risk merchant services?
As with any financial transaction, there are associated risks. These types of accounts may involve higher rates and fees than standard business accounts, this will obviously impact your bottom line. You should ensure that you fully understand how much money these services can save you before you commit to anything.
Additionally, you should be fully aware of the risks involved with accepting credit cards. If a transaction is made fraudulently or if an account has been hacked, you are responsible for the costs associated with it – even if your business is not to blame. These types of losses can be very damaging to your reputation and could result in financial penalties, lawsuits, and even bankruptcy.
