How Merchants Identify ‘High Risk’ Accounts

How Merchant Processors Identify ‘High Risk’ Accounts?

A merchant is a wholesaler or a retailer who trades in goods and services produced by any or all sources to be sold to anyone and everyone for the aim of making a profit, sales, cash inflow and outflow. In the face of the law, a merchant is seen to have a grounded knowledge intellectually and financially about the services he/she provides to boost economic development and growth. A high-risk account is an account for card processing where the bank processing credit card has classed the merchant as high risk merchant. If a business has been identified as high risk due the industry the business is operated in and the number of chargebacks faced during a transaction of goods and services. Businesses connected to travel can be referred to as high risk due to the high level of cancellation that can take place.

Businesses linked to travel are prone to external variables such as weather or change in the traveler’s schedule. Due to this reasons the merchant may incur chargebacks that are higher than, and thus referred to as a high-risk business. Another illustration is businesses linked to the audit industry. In this sector, it is prone to customers initiating a chargeback and in denial of never visiting the adult site. For businesses where customers mostly claim they weren’t the one who originated the transaction, the adult site can keep the IP address and time the website was visited by the customer. For merchants who operate high-risk businesses, it is important to restrain or prevent chargebacks and control the way they happen.

A business can be referred to as high risk for many conditions. The owner of the business may have a poor credit profile or a low credit score. Such accounts are a form of credit which is paid by the bank to a merchant before any service yields payment from a customer. The business could be a startup and have no credit history of card processing. The business may be contending in a new sector which is not yet proven. The organization could be providing service to customers overseas. It is important to let the customer know of the charges that may be attached to a particular transaction. Banks are often suspicious of offering credit card processing services to enterprises that tarnish its image or reputation and tag such businesses as high risk. A payment by credit card to a merchant is regarded as a short-term loan. So the credit history is one way to know the risk of transacting with a new merchant.

Here is a list of high-risk businesses:

  •  Pornographic Websites
  • Collection agencies.
  • Gun sales (online).
  • E-cigarettes.
  • Credit repairs.
  • Bad debt services.
  • Debt consolidation.
  • Credit Counseling.
  • Consulting services.
  • Money exchanger.
  • Transmitting money companies.
  • Massage Parlors.
  • Tour operators.
  • Airline services
  • Vacation planners
  • Bail bonds
  • Tobacco products.(online).

Charges and rates attached to a high risk merchant account are a bit more than a standard merchant account. It is recommended that high risk merchants do a comprehensive research to find the best the merchant account provider.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp