High Risk Merchant Accounts: Expectations vs. Reality

High Risk Merchant Accounts: Expectations vs. Reality

You probably never heard of a high-risk merchant account until your business was classified as one. In fact, the term “high-risk” might put you off thinking that this could be an unfair judgment to your business, but in fact, it’s not. 

Being classified as a high-risk merchant has nothing to do with the type of business that you’re running, the products that you’re selling or your identity as an entrepreneur. You are only classified as such because your business or industry has a greater risk for chargebacks.

But being a high-risk merchant also poses some challenges to your business, especially when it comes to payment methods where your local banks and payment providers might not accept your application. 

Luckily, there are many companies that cater to high-risk merchants these days. But before you get into one, it’s very important to learn about some of the realities of having a high-risk merchant account:

  • You need a payment gateway. If you’ve been putting off applying for a high-risk merchant account thinking that your business would survive without it, you’re missing huge opportunities to increase your revenue and gain more customers. 

With more than 50% of consumers choosing to shop online and pay through digital transactions, having a payment gateway will allow you to process online purchases safely so you can gain the trust of customers and offer them a way to shop conveniently.

  • You will have chargebacks. You’re already classified as a high-risk merchant because the nature of your business puts you at a higher risk for chargebacks, and it will happen at some point and no matter how careful you are. 

It’s very important, however, to keep chargebacks below 2% by making sure that you have avenues for customers to reach out for complaints before they opt to file for a chargeback. 

  • You cannot afford to accept only cash. According to studies, only 25% of all businesses accept cash only as a form of payment while most have already adapted digital transactions because of the increasing number of consumers choosing to pay online for products and services. This means that you cannot afford to accept only cash because you could be losing potential sales and the opportunity to grow your business.
  • You will have a harder time than low-risk merchants. Yes, it’s not your fault that you’re classified as a high-risk merchant, but the hard truth is, you’ll be having a harder time than low-risk merchants. 

For one, you need to fulfill more requirements, take care of your debt and maintain good credit to get a better chance at getting approved for an account. 

You should also expect to wait longer for your application to get processed and approved because merchant providers would want to make sure that you meet all their requirements for a high-risk merchant account.

Although it’s not easy being a high-risk merchant, applying for a high-risk merchant account is definitely worth the long process because it allows you to expand your clientele, increase your revenues and grow your market. 

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