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High-Risk Merchant Account: What It Is And How It Works

Looking to launch a company in a sector with a high risk? Well, a high-risk merchant account is essential for you.

Today, Online businesses are booming, and also most merchants shifted online. But, to run online businesses, the merchant needs to accept digital payment, and they need a merchant account. Nowadays, most high-risk businesses are booming because of the suitable high-risk merchant account and high-risk payment gateway.

But the main point is how you know your business is high-risk and how an individual can get it because most service providers deny working with high-risk businesses.

Here, we will discuss in detail high-risk merchant accounts. So, let's start with a definition.

What is High-risk Merchant Account?

Before moving to the high-risk merchant account, first, try to understand what is a merchant account. A merchant account is a bank account that is essential to receive electronic funds from credit and debit cards, local payments, and other forms of alternative electronic payment. Any firm that wants to conduct electronic transactions must get a merchant account.

An account issued for high-risk businesses is called a high-risk merchant account. Acquiring banks or financial service providers offer International Payment Gateway for you Businesses

Businesses have the same chances available from high-risk merchant account service providers as from standard service providers. High-risk merchant accounts come with higher processing fees and penalties, but they can be essential for businesses hoping to survive in today's commercial environment.

What are the Pros and Cons of High-risk Merchant Accounts?

Once merchants can obtain a high-risk account, they can get many advantages. Some of its pros and cons are -

Pros -
  • Allows the merchant to accept several currencies from all over the world.
  • Long-term growth chances
  • Offers high chargeback defence
  • Boosted revenues
  • Get an account for unexpected chargebacks.
  • Handling bank card transactions while having a bad credit rating or financial difficulties
Cons -
  • Higher handling fees.
  • Potentially necessary book account, up to 50% of the average monthly volume.
  • The moving reserve may be retained for up to 180 days after account closure.

Why do Some Merchant Consider High-risk?

Well, there are many reasons why acquiring bank or financial service provider defines a merchant as high-risk. Every service provider has their own set of rules for high-risk but in general, below is what you can expect might be classified as risky:

  • High purchase volume – If sellers make many purchases or have a high average deal rate, they could be viewed as high risk. Vendors may be classified as high-risk if they process over $20,000 in monthly payments or make regular purchases of $500 or even more.
  • Approving global settlements – A business may be viewed as high risk if it sells to customers in countries with a high risk of fraud if it does business there (any country except the U.S., Canada, Japan, Australia, or the nations in Europe).
  • New Merchants – Simply because they don't have a track record, merchants who have never accepted payments before or have only processed a small number of past transactions could be considered high-risk.
  • Low-credit score – If the merchant has a low or poor credit score, they may be classified as high-risk.
  • High-risk Industry – Even if a merchant has a perfect track record, they could still be classified as high-risk since the sector they operate is more susceptible to fraud, refunds, and chargebacks. For instance, businesses that rely on subscriptions are classified as high risk because several customers sign up for a trial period only to forget to stop making payments. They frequently charge back the payment when they review their statements and discover the overlooked costs. Some other high-risk industries are – forex, gambling, casino, IPTV, adult industries, etc.

Comparison Between High-risk Merchant Accounts and Low-risk Merchant Accounts?

High-risk businesses must have a high-risk merchant account because traditional service providers never approve the merchant account for high-risk businesses. Let's have a look at the difference between a high-risk merchant account and a low-risk merchant account.

High-risk Merchant Account Low-risk Merchant Account
High chargeback ratio Low chargeback ration
A high number of cancellations Minimal cancellation of orders
The business has a poor credit score The industry has a strong credit score
Operates in a high-risk industry Operates in a low-risk industry
They can accept multi-currency It can allow only one type of currency
Average credit card transactions above $500 The average credit card sale is less than $500
Has to deal with fraudulent customers Low to nil fraudulent customers
The average monthly sales volume is above $20,000 The average monthly sales volume is less than $20,000.
They offer recurring or subscription payments. The business usually sells low-risk items.

How To Obtain a High-risk Merchant Account Hassle-free?

Finding out whether your company is high-risk or low-risk is simple. However, it's not essential that your payment processor additionally include you in the same group.

An individual must submit business and tax records before requesting a merchant account. Your chosen payment provider will decide whether your company should be labelled low-risk or high-risk after submitting the required paperwork and your application has been approved. The payment provider will review the plan and charge you according to that.

But, before finalizing the deal, the merchant needs to research the service provider. The best idea is to go with a specialized service provider like PayCly for high-risk businesses.

PayCly is one of the leading and most popular one-stop payment solutions. It means the merchant can get the high-risk merchant account, high-risk gateway, and high-risk payment processors for their high-risk businesses.

At the very first, the merchant should fill out the online application form and be ready with the necessary documents. Some of the necessary documents are -

  • The license number and the name of the business that issued the license.
  • Incorporation certificate
  • Processing history from last six months.
  • Merchant identification proof
  • Social security number
  • Copy of passport and utility bill
  • Full details of business

Along with this, the merchant should also be ready with their online websites. As "PayCly", we need three to seven working days to approve your high-risk merchant account because we maintain a healthy and professional relationship with most acquiring banks and financial service providers. So, with us, your high-risk merchant account can hassle-free get approved.

Final Thoughts -

After reading this blog, you now know much more about the high-risk merchant account and understand why it is important to have a high-risk merchant account for high-risk businesses.

PayCly is aware of the characteristics of high-risk industries and what you need from us to take your company to the next level. We have agreements with numerous acquiring banks and financial service providers globally so that we can approve your Payment Gateway with all the necessary documentation in three to seven working days.

Because we use futuristic credit card processing and anti-chargeback solutions, we are confident that we are the best fit for most high-risk businesses.

Feel free to contact us through mail - info@paycly.com or directly drop your query here - https://paycly.com/apply-now.php any time to know more about our services.

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