What is The High-Risk Merchant Account?

A merchant account gets identified as a high-risk account when the payment processor labels it as a higher risk for chargebacks and fraudulency. Moreover, the high-risk merchant account also gets subjected to the rolling reserve.
A payment processor also holds a certain percentage of their income until it further verifies that transactions were not fraudulent or did not carry the risk of chargeback. This is why merchant accounts pay higher processing fees to account for the risks.

What are the reasons for a merchant to be considered high-risk?

There are several reasons why the payment processor identifies a merchant account as high-risk. Each provider has a different set of criteria for high-risk merchant accounts, and here are some reasons that mark them in the high-risk category.

High Transaction Volume:

Several merchant accounts are considered high-risk if they have a high volume of transactions and average transaction rate. If the merchant accepts international payments, their business gets marked as a high-risk business.

New Merchant:

If a merchant has never processed payments or carries the minimum history of processing transactions, their business is considered high-risk as they don’t have a track record.

High-Risk Industry:

If a merchant carries a clean record, they get marked as a high-risk industry due to the high risk of fraud, returns, and chargebacks. This is why subscription-based companies get labeled high-risk, as many people sign up for the trial and forget to cancel their payments.

Give A Read To Know How Can One Open The Merchant Account:

In case you run an eCommerce business, then given below are some factors that you need to keep in mind while choosing the right payment provider for your merchant account. It stands true, especially when a consumer has a high-risk merchant account.

Rate And Fees:

The merchant account fees vary and depend upon the volume of card transactions that need to be processed. The payment processor includes fees that need to be paid for debit and credit card transactions, prices, service charges, and much more.

Chargeback Fees:

If an individual has a high-risk merchant account, the chargeback fee is the factor that is considered seriously. This is because businesses qualify as high risk because of more customer chargeback.

When the fees remain high for chargebacks, the merchant will pay a heavy amount to banks and other financial institutions that are involved in them. As a result, some providers can go to the extent of closing their accounts if the chargebacks remain high and frequent.

When individuals apply for a merchant account, they need to provide business and tax-related documents. After processing the application, the payment processor assesses whether the business gets classified as a high-risk or low-risk merchant account.

Conclusion:

In the end, we can conclude that it would be better if you choose the payment processor that carries some advantages. It will help you to make secure and safe financial transactions. It will also help in detecting fraudulent activity.