What is a High-Risk Merchant Account and How does it work?

A high-risk merchant account is a payment processing account for businesses with an increased risk of chargebacks. These types of merchants usually pay higher fees than average, but the benefits may outweigh the cost.

If a company has high potential of chargebacks, or historically many chargebacks and refunds, the bank may put a reserve on your account. It’s the amount of money that will cover the possibility of chargebacks.

High Risk Merchants:

When looking for a high risk merchant account many factors are taken into consideration, but industry reputation and transaction history will most likely have the highest influence on your rate.

There are some general attributes that would classify as a high risk merchant, but they differ depending on your payment processor.

• Transactions of over $5000
• Bad credit history and excessive chargebacks
• Over $20,000 monthly sales volume
• Businesses selling to countries considered of high fraud risk

Does your business need a high-risk merchant account?

Let’s use an example: If your business is in the Online Gaming industry, there are potential factors that could cause cancellations. This usually results in many Customers filing chargebacks and refunds. Some other industries can be Casinos, Gambling, CBD, Dating and adult-themed websites.

If you run a business in the industries mentioned above and similar, you need to obtain a high risk merchant account for your website. For businesses with higher potential chargeback ratios, this is of particular concern when choosing which type of credit card processor will best suit your needs. At Centrobill we are always available to answer any questions you might have regarding how to acquire a High-Risk Merchant Account.

High-risk merchant account fees

The harsh truth is that high-risk merchant accounts cost more than low-risk accounts, so you need to prepare to pay more in processing fees and account fees.

But even if you choose to opt for a high-risk merchant account with higher fees, it is important to know that these rates are outdated and they offer competitive prices when compared with the cost of other accounts.

Some high risk payment providers will charge you a setup fee, monthly fee, and even a PCI fee. They might also charge an early termination fee. Read the contract carefully before you sign it to see what fees are charged.

The payment processing industry is changing. Look for high-risk processors that only charge you when people use your website or app.

Another expense characteristic of a high-risk merchant account is a rolling reserve. It is an additional layer for the bank against chargebacks or unexpected activities. This means that if you have a lot of chargebacks, then part of your credit card processed volume will be secured and it depends on the business model and processed volume. This reserve is held by the issuing bank, so if you decide to switch high-risk merchant accounts you can request a release once your high-risk account has proven that there won’t be high chargebacks.

Higher risk business comes with a higher rolling reserve rate. Generally, high-risk businesses offer a higher deposit to the acquiring bank which is calculated immediately on opening the account and automatically settled in your weekly statement.

Note that lower risk accounts are offered for new merchants who have no credit history but may be charged smaller deposits or have different requirements each week.

Chargebacks, are fees that may happen when a cardholder files for the chargeback and asks the bank to dispute the charge. The bank will ask for money to cover their costs of processing this request.

With high rates for fraud and chargebacks, owners of businesses processed daily are deterred from getting a high-risk account. However, these rates can be negotiated based on the number of transactions made.

Can I apply for a high-risk merchant account? How?

To get a high-risk merchant account, you need to fill out an application online. This will let you accept card payments. You also need to find a reliable high-risk payment processor. The process of applying for a high-risk merchant account is short and simple. At Centrobill you will find more than a payment partner, we will help you find a bank that matches your business needs. Once your business is approved by the acquiring bank, you can start processing payments online or mobile. If you would like to know more about how you can apply for a High-Risk Merchant account you can always get in touch with us at Centrobill. Make sure you have all of your company documents and KYC of the beneficial owners and directors.