The Truth About High Risk Merchant Accounts

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By MerchantGuide

If you or your business is considered "high risk" by merchant account providers, then I don't have to tell you that opening up a merchant account -- and keeping it open -- can be a challenge.

So why does an account get considered a high risk merchant account?

And if you are in that category, what can you do when you need merchant services for your business?

High Risk Merchant Services

There are basically TWO reasons that can land you or your business on the "high risk" list:

  1. The TYPE of business you have.
  2. Your personal credit history and credit score.

Let me explain.

The term "risk" for merchant service providers basically means risk for them. So where is the risk?

Risk is related to chargebacks.

A chargeback typically occurs when someone contests a charge on their credit card, either claiming fraud or that the charge was not authorized by them.

What few people know is that when a merchant account provider deposits money into your bank account 24 to 48 hours later for authorized transactions, they are liable for the amount deposited for SIX months after the transaction.

Meaning... after depositing money for transactions, any chargebacks that may occur on any of your transactions for the past six months.

So their biggest concern for merchant account providers is the risk they take in depositing money into your bank account and the need for them to get it back if a chargeback occurs.

They want to be sure they can get money out of your account.

That you are still in business, or have enough funds in your account to cover any chargebacks.

And that's why "high risk" accounts are flagged the way they are, based on industries with higher than average chargebacks, or for people with bad credit.

By the way, the term for "high risk" business is typically called a "blacklist"

So what can you do if you fall into the high risk merchant account category?

For starters, understand that the majority of merchant service providers will not work with you at all.

And that includes your local bank (who simply refers you out to one of their corporate "partners" - see my Costco Merchant Services article for a great discussion of this problem).

You will need to work with a specialist.

To find high risk merchant account providers that can help you get set up, simply follow the link and compare free merchant account quotes.

That way you can make side by side comparisons of the different merchant account providers. Then compare offers for yourself, ask questions and select the one that's right for you.

After all, the choice is yours...

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