High Risk Merchant Account – How Does It Work?

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Suppose you are a business owner who has established their business relatively successfully and is looking to expand. In that case, you need to look into opening a high-risk merchant account to help your business grow and make the management of transactions easier. 

Bank accounts and credit card processing for high risk merchants is significantly different and more beneficial than it is for low-risk businesses and merchants as it comes with more advantages. If you’ve been thinking about a high-risk merchant account, here’s everything you need to know. 

Before understanding what a high-risk merchant account is, you need to understand what a merchant account is all about. In simple terms, a merchant account is similar to a bank account as it is where all the funds from your business’ debit card and credit card transactions are deposited after processing. However, it is not a bank account – your funds go to your business bank account from here after being approved by your payment processor. 

According to a detailed article on merchant accounts by NerdWallet, a high-risk merchant account is for businesses with higher financial risks and chargebacks involved. These accounts provide a lot more leeway and Improved business opportunities with a platform to handle transactions with more ease and convenience.

Let’s take a look at some of the benefits of high-risk accounts and how they can help you expand your business.

THE BENEFITS OF A HIGH-RISK MERCHANT ACCOUNT 

When talking about a high-risk merchant account, there are plenty of benefits and advantages you can get – and these can have a pretty big impact on your business. Let’s consider what some of the major benefits of a high-risk merchant are:

  • INCREASED PROTECTION AGAINST HIGH CHARGEBACK WILL PREVENT LOSSES 

With a high-risk merchant account, you get an increased layer of protection against the consequences of high chargeback. You won’t have to deal with account termination or high penalties in case of exceeding chargebacks; you’ll get some time to pay it off and prevent the termination of your account.

  • GLOBAL COVERAGE WILL ALLOW YOU TO EXPAND TO OTHER COUNTRIES 

A high-risk merchant account comes with the possibility of expanding your business to various other countries by allowing international transactions in multiple currencies. You’ll be able to reach more people and get customers from other parts of the world if you can accept payments from them and provide your services/products accordingly.

  • INCREASED BUSINESS OPPORTUNITIES WILL HELP YOUR BRAND GROW 

A high-risk merchant account opens up the business world a little wider for you as you would now have the capacity to engage in some aspects of it that a low-risk merchant account does not allow. You’ll get to expand your business and grow your brand with new business ventures.

Contrary to what you might expect, there aren’t many disadvantages that come with a high-risk account – it will not harm your business whatsoever. According to a blog post by Securionpay,  The only drawback is that you’d have to pay a higher processing rate and fee than low-risk accounts. When you look at the benefits and prospects of growth, these don’t amount to much.

HOW YOU CAN APPLY FOR A HIGH-RISK MERCHANT ACCOUNT

When you apply for a high-risk merchant account, make sure to look for one that is reliable and honest – you’ll need this if you want to accept card payments and get the benefit of credit card processors.

The process and application are not as complex as you might expect as long as you look for a bank that aligns with the needs and features of your business. After that, all you would need to do is fill out an application online and provide the required documents. We present here a list of some business-related documents you are going to need with most banks:

  • Incorporation certificate 
  • A chart of the organizational structure 
  • Shareholder’s certificate 
  • The license number of the organization that issued the license for your business
  • 6 months of processing history, including the number of transactions and chargeback percentage 
  • A website for your business that meets the standard requirements for a high-risk merchant account

After you’ve submitted all the documents along with an application to open a high-risk merchant account, your business and the risks involved will be studied by risk management experts who will decide whether you meet all the requirements or not. Based on your credit card processing history and chargeback threshold, the bank will decide whether you qualify for a high-risk account or not.

HERE’S WHAT YOU NEED TO DO IF YOUR APPLICATION FOR A HIGH-RISK MERCHANT ACCOUNT IS APPROVED

Suppose your payment processor approves your application for a high-risk merchant account, and you have to finalize a contract to activate your account. In that case, you need to consider a few things before deciding. Here’s what you should do once your application and business are approved for a high-risk merchant account:

  • DO YOUR RESEARCH BEFORE FINALIZING ANYTHING

Even if you did your research before applying for an account with a payment processor, make sure to do one final check. Take a look at online reviews, user testimonials, and policies put forward by the payment processor before deciding if you want them to handle your account or not.

  • READ THE CONTRACT CAREFULLY

High-risk merchant accounts come with a high-risk contract if you don’t read it thoroughly before signing. Understand all the clauses properly and have a lawyer look through them before signing to make sure you don’t set yourself up for failure and loss down the road.

  • WORK ON YOUR DOCUMENTS AND CREDIT SCORE

Though you probably have all your documents ready at this point, make sure to cross-check them all and prepare everything, so you don’t have any trouble later. Make sure to work on your credit score and keep it consistently high so you don’t have any trouble in that department; it is one of the most important factors that the risk analysts will look at. 

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THE VERDICT ON HIGH-RISK MERCHANT ACCOUNTS AND THEIR BENEFITS

If you run a business with high financial risks and high chargebacks involved, then you probably qualify for a high-risk merchant account. Not only will this provide you with improved security and a more cohesive platform to process your payments, but it provides you with more business opportunities. If you think you have a high-risk business, you need to look into it – you might come to regret it if you don’t.

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