Common Misconceptions About Acquiring a High-Risk Merchant Account

The Most Common Misconceptions About Acquiring a High-Risk Merchant Account

Are you considering credit card payments for your online business? If your company belongs to a high-risk industry, chances are your business does not qualify for traditional credit card processing arrangements. You need to find a high-risk merchant services provider who is willing to accept the risks and can handle the unique guidelines and requirements associated with your business category.

One of the first steps in acquiring a merchant account for high-risk business is to do your research. However, high-risk merchant services are often misunderstood, and once you start searching for vital information, you’ll most likely encounter several myths along the way, such as:

1. You can’t get payment processing services for your high-risk business

While it’s true that traditional banks and regular merchant account providers may refuse to work with high-risk industries, acquiring debit and credit payment processing services for your business is definitely achievable. You may need to submit financial records with more details before being approved, but once you’re good to go, high-risk merchant account providers will ensure that you’ll always be able to accept credit card transactions.

2. The term “high-risk” is absolute

Different merchant account providers can have different underwriting guidelines. As a result, there are grey areas and while one provider will categorize your business as high-risk, another may not see it as such. The most common high-risk businesses and industries include:

• • • Card Not Present
    • Online penny auctions
    • Bitcoin mining
    • Student loans
    • Collection agencies
    • Payday lenders
    • Insurance brokers
    • Nutraceuticals
    • Tobacco companies
    • E-cigarettes and vape shops
    • Online gambling
    • Online gaming
    • Adult entertainment
    • Online dating and escort services

If you are unsure whether your company belongs to the high-risk designation or not, it’s important to talk to various providers and compare them while you shop around.

3. Your credit score ultimately defines the risk designation of your business

Payment processors may be interested in your credit standing as the business owner, but they care more about your industry’s record. The exact criteria for determining if a company falls under high-risk status vary, but the following factors are generally used:

• High fraud and chargeback rate

If your industry has a history of high chargeback and fraud rate, which is often based on the customers’ behavior, it will be deemed as high-risk.

• Selling products and services with disputable legality

If your business distributes goods that are legal in some states and illegal in others such as cannabis and adult entertainment, your company will be categorized as high-risk.

• Selling products and services that are heavily regulated

If the goods you sell are age-restricted or can only be purchased when certain conditions or requirements are met (e.g. licenses for firearms and prescriptions for medicine), your business will fall under the high-risk category.

• Dubious sales and marketing practices

Is your industry viewed as a scam because of a few unscrupulous companies? If so, guilt by association will make providers wary, resulting in getting labeled as high-risk.

• High-average ticket sales

If your business accepts credit card purchases on products and services with unusually high costs on a regular basis, your company can be tagged as high-risk.

• Overseas headquarters

If your business sells goods primarily in your country but has an offshore main office, your company may be flagged as high-risk because of the huge potential of fraud and lax banking regulations.

4. Being a high-risk merchant is permanent

Agreements and policies regarding an industry’s risk designation can change over time. While you can’t control all of the factors that make your business high-risk, you can do your part in minimizing the number of chargebacks to gain better financial records with credit card processors in the future. Operating in regions deemed safe, such as North America and the European Union, and accepting only one currency, are also a few things you can do to turn the tide in your favor.

5. Everything about high-risk merchants is bad

Not true. Acquiring a high-risk merchant account, in fact, protects your business from the risks associated with your industry. Unlike regular merchant accounts, high-risk merchant accounts offer leniency for excessive chargebacks and fraudulent transactions, as these risks are already expected. You don’t have to worry about processors freezing your funds or terminating your account when your chargeback rate regularly fluctuates.

6. Start-up businesses cannot be approved

Credit card processing history and business stability are often necessary to complete the process of applying for a merchant account. For start-ups, there is obviously a lack thereof. However, it’s not true that you can’t accept credit card payments if your business is new. Start-ups are considered high-risk, and therefore can acquire a high-risk merchant and be approved. These start-up businesses may be required to submit an entire business growth and revenue forecast, and all other related papers that show the legitimacy of the business.

7. Price is everything when choosing a high-risk merchant account provider

While high-risk merchant accounts tend to cost higher than regular accounts, a cheaper rate doesn’t always translate to better services. If your provider doesn’t have the resources to perform maintenance tasks to ensure seamless use or the right tools to fix technical issues, you may end up spending more money on repair costs and lost sales. Thus, price is an important factor, but not the determining one when choosing a high-risk merchant service provider. Focus on the provider’s customer service record, flexibility, PCI compliance, privacy and security measures, additional services, and other factors before you sign the contract.

Misinformation is unfortunately prevalent when looking for information regarding high-risk merchant services. Don’t let these myths hinder you from acquiring a suitable high-risk merchant account for your business needs. Your customers want a variety of payment methods, and forgoing credit card payment processing can be detrimental to your business, especially when you’re selling goods and services online.

Choosing Bitronum as your high-risk payment processor means you have found a business partner that will take care of all your online payment needs, and also committed to helping your business grow. Thus, our mission is to provide quality credit card and crypto payment processing solutions and merchant accounts for high-risk industries based in Europe. Our specialists have been working with high-risk industries for more than 20 years, and we will gladly share our experience, knowledge, and skills to help your business grow. Talk to us to learn more about our services.