Merchant accounts are required in order for a business to accept credit card payments. As a merchant, there are two places you can obtain a merchant account; a bank, or a third party provider. For online merchants the most popular, so in most cases cost effective, source is from an additional party merchant account issuer.
A high risk processing account is required by businesses that, when compared along with ‘traditional’ goods/services business, close to a higher risk of:
High amount of sales
High rate of refunds
High rate of charge-backs
Other reasons a merchant may be categorized as a high risk are:
Merchants Location – Some merchant account providers won’t accept merchants from certain countries.
The Product/Service the merchant sells is prohibited in some jurisdictions.
Merchant Credit standing – Some providers will not accept merchants with poor or no credit foundation.
Due into the high risk classification, most banks won’t provide an account provider to those who are in a high risk industry (such as adult entertainment, replica goods, pharmacy merchant account payment gateway etc). As such some outside providers offer their services to both general merchants and heavy chance merchants.
Merchant account providers that happen to be developed to service high risk merchants will normally provide a higher level of fraud protection, with a purpose to decrease the price of their merchants incur. However, in order to cover the higher level of risk, rates with a high risk merchant account will definitely be higher than their lower risk counter-parts.
When purchasing a high risk merchant account, there are a number of factors to be able to take into account. Rates will be one of the most important factors, and this includes fees for refunds and charge-backs, along with transaction fees, the discount rate and recurring fees. You will need to look into fraud protection, customer service and reporting available you r as a merchant.