If you are planning to start your own online business, chances are you would have heard of the term high-risk merchant account and how it can turn into a nightmare for all your ideas of a quick fortune in the online sector. Well, worry not. Just because you are planning to start your e-commerce portal does not mean that you would need such an account. Hence before you go about setting up your online credit card processing system, it is important to understand what we mean by “high risk”, and more importantly…would you need one?
Let us start by understanding the term. High-Risk Merchant Account simply refers to a merchant account which the bank sees as a risky investment. You have to understand that every business has a certain degree of “risk” or “uncertainty” associated with it. When providing banking accounts to businesses, banks have to check the viability of the business, the securities available and how it would be able to simply “minimize” the risk involved. With online businesses, this “uncertainty” is higher than a traditional brick and mortar set up.
The primary reason for such accounts continues to be the high possibility of chargebacks on your account. On top of that, while there are many long-term businesses on the internet, many “categories” of online businesses have a rather short shelf life. Essentially, what we mean by that is the businesses gain quick momentum, become popular and then before you know, they simply fade away. Also, there are other categories of business which are not essentially legit and leave a lot of grey areas for the merchant banks to meander. Since the online banking also requires online credit card processing, the high possibility of fraud makes it a viable threat to the merchants. These businesses are hence looked at with more than ordinary scepticism. It’s not that you would not find a vendor – but high-risk accounts would often draw a much higher interest rate.
Here are a few examples of businesses that qualify for a high-risk merchant account:
- Adult Entertainment
- Online gaming merchant account
- Gun Dealers
- Medical Marijuana
- Travel & Reservation
- Technical Support
- E-Cigarettes, etc.
Apart from that, if you have your business registered outside of the USA, you directly qualify for a High-Risk Merchant Account and should accordingly reach out to vendors that can provide you with the same.