High Risk Merchant Account Providers..

High Risk Merchant Accounts

A high risk merchant account is a merchant account or payment processing agreement that is tailored to suit an organization which is deemed high risk or is operating in an industry that has been deemed as such. These merchants usually need to pay higher fees for merchant services, which can add to their cost of business, affecting profitability and Return on investment, especially for companies that were re-classified as a high risk industry, and were not prepared to deal with the costs of operating as being a high risk merchant. Some companies focus on working specifically with high risk merchants by providing competitive rates, faster payouts, and/or lower reserve rates, all of which are made to attract companies which are having difficulty choosing a place to conduct business.

Businesses in a selection of industries are labeled as ‘high risk’ because of the nature of their industry, the technique where they operate, or a number of other factors. For example, all adult companies are considered to be high-risk operations, as well as travel agencies, auto rentals, collections agencies, legal offline and online gambling, bail bonds, and many different other online and offline businesses. Because dealing with, and processing payments for, these firms can carry higher risks for banks and financial institutions they may be obliged to sign up for a high risk credit card merchant account that features a different fee schedule than regular merchant accounts.

A processing account is really a bank account, but functions more like a line of credit that enables a company or individual (the merchant) to receive payments from credit and debit cards, used by the consumers. The bank that gives the credit card merchant account is called the ‘acquiring bank’ and the bank that issued the consumer’s credit card is referred to as the issuing bank. Another essential element of the processing cycle are definitely the gateway, which handles transferring the transaction information from the consumer to the merchant.

The acquiring bank may also offer a payment processing contract, or perhaps the merchant may need to open a higher risk credit card merchant account with a dangerous payment processor who collects the funds and routes these to the account in the acquiring bank. Within the case of the high-risk merchant account, there are additional worries about the integrity in the funds, and the possibility that the bank may be financially responsible inside the case of the problems. For that reason, dangerous merchant accounts usually have additional financial safeguards set up, including delayed merchant settlements, where the bank supports the funds for any slightly longer period to offset the risk of fraudulent transactions. Another method of risk management is utilizing a ‘reserve account’ which is actually a special account on the acquiring bank where a portion (usually 10% or less) in the net settlement amount is held to get a period usually between 30 and 180 days. This account may or may not be interest-bearing, as well as the monies from this account are returned for the merchant on the standard payout schedule, once the reserve time has gone by.

Payments to some high-risk merchant account are deemed to hold an increased chance of fraud, as well as an increased probability of chargeback, refund, or reversal. As an example, someone may make use of a stolen or forged debit or credit card to create purchases, or perhaps a consumer might make an effort to execute an advance-authorization transaction (like renting a vehicle or reserving a hotel), using a leayte card with insufficient funds. This increases the risk for the bank as well as the payment processor, as they will need to deal with the administrative fallout of dealing with the fraud. Ecommerce can also be a risk factor, because businesses tend not to actually see an imprint charge card; they take orders over the Internet, and this can up the risk of fraud considerably.

When a merchant applies for a processing account having a bank, payment processor, or any other merchant account provider, there are lots of considerations before settling over a particular merchant provider. It is usually easy to negotiate lower rates, and one should always request multiple quotes before choosing which dangerous processing account provider for their processing needs.