High Risk Businesses and Merchant Accounts

For some businesses, opening merchant accounts is relatively simple - just a matter of filling out the required paperwork and finding that they are able to start to accept credit cards within, at most, a period of days. Those businesses that represent a greater risk to the merchant account provider, however, will find that they are looking at a different type of account.

High Risk Merchant Accounts

High risk merchant accounts will need to be considered when you have been unable to easily obtain merchant services. High risk merchant accounts are those accounts in which considerations are made for the risk of fraudulent charges, high sales volume and, in some cases, online credit card processing.

Industries in Which High Risk Merchant Accounts Are Common

If you are just looking into merchant accounts for your business, you may not be aware of whether or not your account will be viewed as a high risk. One possible set of guidelines is to look at the type of industry that you are involved in.

The following business types often will need to turn to high risk merchant accounts:

• Travel businesses
• Online dating businesses
• Businesses that are focused on online auctions
• Liquor stores
• Tobacco and cigarette distributors
• Pharmacies - both online and off
• Adult entertainment businesses
• Online casinos
• Gaming services
• Debt counselors and bankruptcy services
• Bail bond providers
• Virtual service providers
• Diet and health care centers
• Mobile phone service providers

Businesses in these industries are often, but not always, associated with a degree of risk to the merchant account provider.

What Puts a Merchant in a High Risk Category

Simply operating a business that is typically associated with high risk does not necessarily mean that you will be forced to look into high risk merchant accounts for your business. Often, there are specific, key points that are taken into consideration.

High risk merchants are defined by merchant account providers as:

• Those businesses that are not properly licensed within their state or the country in which they are doing business.
• Those businesses that have had a history of fraudulent transactions or that have bankruptcy on their records; often, these companies have been blacklisted by credit card processing companies.
• Those businesses with inconsistent credit reports.
• Those businesses that are involved in telemarketing, ticketing, gaming and other industries in which there is a high potential for fraud.
• Those businesses that will be making a large number of transactions daily.
• Those businesses that will be processing very few transactions - businesses with a consistently low sales volume that may have difficulty making payments toward processing fees and other merchant account expenses.

Businesses will often be forced to look to high risk merchant accounts if they can be defined by one or more of the above statements.

Costs Associated with High Risk Merchant Accounts

When you find yourself looking to high risk merchant accounts, you’re likely to find that you will be required to pay higher setup fees. You may also discover that the rates associated with credit card processing are higher. In both cases, the reason for the increased cost is associated with the amount of risk that the merchant account provider will be undertaking.

Alternatives to High Risk Merchant Accounts

Some merchants who are looking into credit card processing services for their businesses are not going to feel comfortable choosing a high risk merchant account. These merchants may initially begin looking for alternatives - services that will enable them to accept credit card payments without opening a merchant account.

It’s important if you are looking for merchant account alternatives for your business that you focus on the processing costs associated with those alternatives and that you are looking at the services that are associated. While at first glance merchant account alternatives may seem like a good idea, often these alternatives are not the best solutions.