High risk merchant accounts are basically merchant accounts or are payment processing agreements that would be perfectly fit for those businesses that are labeled as high risk. Such a merchant will basically be forced to pay higher fees, adding to business costs and directly affecting ROI and profitability. That is especially the case for those companies that ended up being re-classified as being a part of high risk industry. When something like this happens and you are not ready to deal with all the extra fees, bankruptcy is right round the corner.
The very good news is that there are companies that are specialized in offering services for the high risk merchants. Extra services are also developed for the industry like high risk merchant accounting by Payment Savvy. When you work with a company that has such a specialization, you gain access to faster payouts, highly competitive rates, lower reserve rates and much more. Everything is basically designed for gaining customers that have trouble in locating places to do business as they want to.
There are various businesses labeled as being high risk simply because of industry nature, how they operate and other related factors. As an example, all the adult businesses will be seen as being high risk operations, just like the travel agencies, collection agencies, legal gambling, bail bonds and various online financial institutions. Processing the payments for the companies will automatically involve a higher risk for financial institutions and banks. This will make the companies obliged to agree to the high risk merchant account, one that is special and that includes higher fees.
We have to see merchant accounts as being bank accounts. However, they will function in a similar way to the credit line that will allow the individual or company to receive a payment from debit cards or credit cards. Banks that offer merchant accounts are known under the name “acquiring banks”. Banks that issue the credit card for the consumer are referred to as being “issuing bank”. We also have a gateway involved in the processing cycle. It is basically the medium that will handle transaction information transfer from a consumer to a merchant.
What needs to be remembered is that payments that go towards the high risk merchant account will be deemed as being really risky as there is a high fraud possibility and there is a higher chance to be faced with reversals, refunds or chargebacks. As an example, when a person uses forged debit cards or stolen cards to make payments, that payment would be eliminated and fraudulent. Such situations are not common but the possibility to end up with chargebacks with collecting agencies, as an example, is much higher.
As the merchant applies for merchant accounts with payment processors or banks, various factors will be taken into account before the account is accepted or not. It is normally possible to work with the merchant account provider in order to get lower rates. Multiple quotes have to be requested before the high risk merchant account service provider is chosen so that all needs are properly met.