Have you ever had a customer want to pay with their credit card but didn’t have the right merchant account? If so, then you know how challenging it can be to process payments. But there are solutions available which make this much easier – like high risk merchant accounts.
High risk merchant accounts allow merchants to accept payment from customers who fall outside of traditional banking laws and regulations. In today’s article, we’ll explain what exactly a high risk merchant account is and why you might need one for your business. For more information about it, keep reading!
What is a high-risk merchant account?
A high-risk merchant account indicates that credit card processors as well as payment companies view the company as more likely to fail on its payments, experience excessive chargebacks or even be a victim of fraud.
Businesses with high risk are usually ones that are relatively new and have a track record of problems with credit or operate in an industry often viewed as controversial or unpredictably.
Businesses that are e-commerce can belong to the high-risk group since they accept what’s called card-not present transactions, or card payments that don’t actually “see” the customer’s card.
High-risk or fair, status can lead to increased fees for card transactions as well as higher rates for processing payments as well as stricter terms and conditions for the reporting and compliance.
If your chargeback percentage begins to exceed a specific threshold, you’re at risk of being deemed an extremely risky merchant. If your chargeback rate has not brought back to a level below the threshold, credit card companies might cease doing transactions with you rendering it impossible to accept transactions from card companies.
What is a Merchant ID?
The term “merchant ID” (or the MID) is an unique merchant id number attached to a company that informs those payment processors that are involved in a transaction to transfer which money.
It’s possible to think of it to be an email address that represents your company. If you don’t have a business ID, the network don’t know where you can transfer your funds.
Merchant IDs are just as important as bank accounts and must be treated in the same way. It is possible to expose yourself to risk if you frequently use this number, so be careful not to share it unless absolutely must.
High-risk merchant accounts: who needs them?
High risk accounts are ideal for e-commerce payment systems that require more stringent authentication procedures and/or have higher fees associated with them. They allow a business to have more control over their finances while providing the flexibility they need to succeed in their market space.
With many options out there and financial advisors to help navigate the complexities of acquiring one, high risk merchant accounts provide an attractive option to any business looking to increase its profit margin while protecting itself from risks related to fraud.
An account for high-risk merchants serves what purpose?
Let’s look at the main reason why high-risk merchant services are essential. In essence, a credit card service provider will transfer funds generated by credit and debit card transactions directly to your bank account for business, typically within 1 or two days, and wait to receive the money from the bank that issued the card however, this could take longer. Consider it an advance.
For business owners in this day and age processing payments has evolved into something that is done in a matter of the click of a mouse making it simpler for customers to make payment and businesses to accept payments on the internet. But, it has also created opportunities for fraud in transactions.
Many companies are deemed high-risk because they are vulnerable to fraud and have the high rate of chargebacks, in addition to other things. Although we all think of markdowns and specials on the internet “a steal,” others might interpret this as a literal statement and consider it an opportunity to “have their cake and eat it,” or, in this instance, commit fraud. People want your product, and they want to take their funds, that ought to absolutely belong to you.
This is why the majority of payment processors are reluctant to grant high-risk businesses an account with a merchant bank and it could take longer for such businesses to get the cash from credit or debit card transactions.
This could have an impact on the operations of their business. High-risk merchant accounts provide businesses in certain industries the chance to operate normally however, with more fees and penalties, as well as stricter requirements to keep.
