Am I Considered a High Risk Merchant?

An Open Shop sign in front of a high merchant retail store

Being a high risk merchant is not an end-all. In fact, some of the most acclaimed businesses are considered high risk. But, what exactly does it mean to be a high risk business and what are some of the obstacles one would face under this classification? 

As one of the leading merchant services companies in the country, First Direct Financial offers extensive support and resources for a wide variety of businesses. Everyone from retailers and restaurants to those in healthcare, hospitality, and e-commerce. It doesn’t matter if you’re considered a low risk or high risk merchant, we’re happy to help. Read our article below to learn what exactly it means to be high risk.

What is a High Risk Merchant Account?

A high risk account is a type of payment processing account for businesses considered to be high risk to banks. This is because banks view these entities as more prone to chargebacks and other potential risks if they partner with them. This results in many banks either completely refusing to service these accounts or leading to higher payment processing fees.

What is the Difference Between a Low Risk and a High Risk Merchant Account?

Before you apply for a merchant account, it’s always good to know where you stand. Merchant account providers have their own criteria for categorizing businesses based on their potential risk, but there are several consistent aspects to account for.  For low risk merchants, these include:

  • Less than $20,000 processed monthly
  • Average credit card transaction is less than $500
  • The industry that a merchant operates in is considered low risk (these are, for instance, low risk-clothes and shoes, household goods, baby products)
  • Zero to low chargeback ratio
  • The country a business operates in is considered low risk (European Union countries, USA, Canada, Australia, Japan)
  • Minimized returns.

When it comes to high risk merchant accounts, payment processing providers look at these:

  • More than $20,000 monthly sales volume
  • Average credit card transaction higher than $500
  • A business sells products and services to countries known for high levels of fraud
  • Bad credit history and excessive chargebacks.

Who Are Typically Considered High Risk?

There are many types of businesses considered high risk. Some you probably would never guess would be considered risky. Some of biggest industries include:

  • Airlines and airplane charters
  • Automotive brokers
  • Casinos, gambling, or gaming
  • E-books
  • Finance brokers, financial consultants, or loan modification services
  • Medical care programs
  • Bars
  • Pawn shops
  • Restaurants
  • Retailers
  • Travel clubs, services, or agencies
  • Vacation rentals

Additionally, merchants who have poor credit or who are on the Terminated Merchant File (TMF) or MATCH list are typically considered high risk. You do not want to find yourself on these lists because they’ll show your merchant account as high risk due to chargeback activity. 

You’re Considered High Risk, What Now?

There are several high risk credit card processing companies on the market, but it’s important that you choose the right one for you. There are several things you must consider when partnering with a payment processor, like:

  • Responsive support
  • Flexibility and customization
  • Transparent pricing
  • Technology
  • Security
  • Expertise
  • Website design
  • Accepted business models

It’s also critical that you look over the contract carefully to ensure you’re getting the most out of your partnership. Additionally, your payment processing fees should be noted and easily found within the document.

First Direct Financial Specializes in High Risk Merchant Account Services

First Direct Financial maintains a large network of representatives nationwide. We keep strict guidelines on all staff to ensure our clients receive the best merchant services possible. From data protection and credit card processing to depositing, we’re there for you every step of the way. Contact us today and learn how we can help your business make transactions easier.