A Guide to High Risk Merchant Accounts
The high risk merchant account is a business account that allows their customers to pay them with the use of their debit card or credit card, however, this must first be approved by a financial institute or by the bank. When businesses apply for a merchant account they will need to pay more for the fees, however this will add to the expenses of the business. There are actually businesses who works with merchants by providing them a faster payout, a reserve rate, a competitive rate and a fast payout. This is very helpful to businesses that are having a very hard time in looking for a place to do their business.
A business will only be considered as a high risk business is when they deal and work with operations that are difficult. Here are examples of high risk businesses; car rentals, bail bonds, legal offline, collection agencies, travel agencies, online gambling and other businesses that operates online and offline. Since it is difficult to work and process payments with these businesses the financial institutions and banks require them to apply for a high risk merchant account. The fees is the main difference of a regular merchant account and a high risk merchant account.
The merchant account is another bank account, this type of account is just like a line of credit that companies use so they can get the payments of their customers in their debit card and credit card. The bank that offered the merchant account is called the acquiring bank, then the bank that provided the credit card is called the issuing bank. There is another important factor with the process and that would be the gateway, this gives the transaction information of the costumer to the merchant.
The acquiring bank will let the merchant sign up for a high risk merchant account if necessary. Other problems that might be faced when they deal with high risk businesses is that there could be problems with the funds and the bank could be held responsible. This is one of the reasons why there are more policies in high risk merchant accounts. The financial policies such as holding the funds for a long time will reduce the risk of them dealing with any fraudulent transaction.
Payments that are made in a high risk merchant account has a higher risk of experiencing charge backs, fraud, refund and reversal.
There are things that must be considered before a merchant could apply for a merchant account. Before a merchant should choose a high risk merchant account provider, he or she must negotiate to have a much more lower rate and many more things.