A high risk merchant account could be the best option for your business to function properly. Don’t settle for less, choose the best merchant services.
There are many different merchant processing services to choose from, so it is important that you understand exactly what you are entitled to, what you need to do to be successful with an application, and the difference between high risk merchant accounts and low risk merchant accounts. We’ll take you through these steps to show you the difference and what you can expect.
What is a high risk merchant account
High risk merchant services are required by those businesses that banks deem to be financially risky. A high risk merchant account includes a payment processing service that allows the business to operate. There could be different reasons to look for a high risk merchant account, such as a history of frauds, a high volume of chargebacks, or a bad credit history.
What is a low risk merchant account
A low-risk merchant account is a standard merchant account for a business that is not deemed a risk financially to a bank or financial institution that is offering an account to them. There are a few reasons why a business might be deemed low risk. It could be that they operate solely in one currency. The products or services are seen to be low risk, such as books, clothing, household items etc. If revenue is under £15,000 a month and the average credit card transaction is under £50, this would also indicate that a company is low risk. Alongside these reasons, low risk merchant accounts are given to companies that are well-established and seem stable and have installed 3D secure technology to help prevent fraud.
Pros of a high risk merchant account
The biggest thing about a high risk merchant account is that it gives those companies that have poor credit and work in sectors deemed high risk, the chance to actually function as a business. Not only that, but there are actually some types of payment options that offer great flexibility to high risk merchants that are not available on low risk merchant accounts. They can collect recurring payments to give one example, as well as having the option to sell a far wider range of services and products that a low risk merchant is able to. If there is a launch event or special sales promotion, this is also something that a high risk account can process.
One of the best benefits to a high risk merchant service is the ability to accept international transactions. There is not the same limit on international currency payments and transactions from other countries, providing a business with a solid foundation from which they can expand a company into different countries and territories if they wish.
Cons of a high risk merchant account
A high risk merchant account obviously comes with some downsides when compared with a low risk account. The biggest downside is of course the associated fees that comes with a high risk merchant account. You can expect higher monthly fees and fees per transaction. There is also the requirement for a rolling reserve of money that must be present in the account at all times to ensure that any refunds or fraud can be dealt with by the business.
Pros of a low risk merchant
A lower risk merchant can command lower fees when looking through the different options of merchant account services open to them. This wider choice of account products helps a company to grow. Merchant accounts are designed to give businesses the best chance to increase sales, stabilise cashflow, manage money in a much easier way through secure payment processing, and overall enhance the customer experience.
Cons of a low risk merchant
The biggest thing about a high risk merchant account is that it gives those companies that have poor credit and work in sectors deemed high risk, the chance to actually function as a business. Not only that, but there are actually some types of payment options that offer great flexibility to high risk merchants that are not available on low risk merchant accounts. They can collect recurring payments to give one example, as well as having the option to sell a far wider range of services and products that a low risk merchant is able to. If there is a launch event or special sales promotion, this is also something that a high risk account can process.
If you realise that the only approach to have a fully functioning business is to gain access to a high risk merchant account, the next step is to choose from the list of high risk merchant processing services that are available to you. A high risk merchant account brings with it a wide array of benefits, allowing an otherwise risky-looking business from a banks point of view, to flourish and move forward with plans. If you are a business in a high risk industry, are more likely to experience chargebacks and fraud, you need to have peace of mind that you can function, and that you can process credit card payments to keep cashflow running.
