All You Need to Know About High Risk Merchant Accounts

Companies in various industries labelled as “high risk” fall into this category based on many different factors, such as the nature of the industry in which they operate and the methods used to complete their operations.  For example, the majority of adult businesses are considered “high risk” and these include travel agencies, collections agencies, auto rental companies, bail bonds, gambling agencies, and many other online and offline companies.  Due to the fact that they carry a high level of risk for financial institutions, the higher risk company is required to sign up for high risk merchant accounts as compared to a merchant account.  This article will provide information on what a high-risk merchant account actually is.

The typical merchant account is a form of bank account developed for traders or companies, hence the term ‘merchant’. This bank account acts as a line of credit allowing the merchant to receive payments from the consumers where the consumer can user either debit or credit cards.  The bank providing the company with the merchant account is known as the ‘acquiring bank’ and the bank issuing the consumer’s credit or debit card is known as the ‘issuing bank’.  Another important aspect in this payment transaction is the gateway, which is the process that handles the transferring of the transaction information from the customer to the merchant.

When the average merchant makes application for a merchant account, there will be factors to consider before settling on a particular merchant provider.  In the majority of cases, it is possible to negotiate low rates; however, companies that are considered high risk will have to apply for high risk merchant accounts and these present with different processing needs.  When an acquiring bank or financial institution signs up a high-risk merchant account, they will have a much higher and different fee schedule to the regular merchant account option.

It is important to note that high risk merchant accounts are tailored to meet the needs of the business that is operating as a high-risk company.  The fees that need to be paid to the bank will more likely be higher than average merchant accounts, and this will increase the cost of their business influencing profitability and return on investment.  Some financial companies will specialize in working with high risk merchants offering faster payouts, more competitive rates, and lower reserve rates; thereby attracting companies that are finding it difficult to locate a place to do business.

Payments to a high risk merchant account do present with certain concerns for the bank or financial institution.  When an acquiring bank offers a high-risk merchant account, there are concerns about the integrity of the funds being obtained with the increased risk of fraud.  To deal with this issue, high risk merchant accounts typically present with additional safeguards including delayed merchant settlements.  A delayed merchant settlement involves the bank holding funds for a longer period to offset any risk of fraudulent transactions.  This is done to avoid the bank being held responsible for fraudulent behavior.

If your business is categorized as high risk, it may be challenging to obtain a merchant account. We provide high risk merchant accounts customized for your business needs. Our high risk merchant accounts  are accessible to traders needing a quick, trusted charge card handling arrangement.

Raagit allows you to accept credit and debit card payments within just 24-48 hours of your application approval. The organization offers savvy administrations, coordinate financing, and additionally PIN-based exchanges to help lessen the odds of extortion. Also, our in-house group works day and night to guarantee expedient record endorsement.