Does Your Business Fall Under the High-Risk Category in the USA?
Payment processing System entities and financial institutions consider businesses as high-risk when they see them prone to a lot of chargebacks. This is the fundamental reason behind the high-risk category. However, several other factors contribute to the same, which we’ll discuss later in this blog.
High-risk businesses need reliable and transparent high-risk merchant processing solutions to smoothly run their operations. Of course, there are quite a few drawbacks and some benefits of having a high-risk merchant account.
Let’s start with the different types of high-risk businesses:
Which are the Different High-Risk Business Industries?
Determining high-risk businesses depends on a number of factors. If we’re jotting down all the product or service industries that are high-risk, the list will be endless! Here are the different industries most commonly considered to be high-risk:
- Casino & Gaming Industry
- Real-Estate Industry
- Adult Entertainment Industry
- CBD & Tobacco Industry
- Online Dating Industry
- Travel Industry
- Finance & Investment Industry
- Weapon Industry
Why are Businesses Categorized as High-Risk?
It’s finally time to discuss what makes a business a high-risk one and why financial institutions consider them prone to risky affairs. Here are 6 common reasons for businesses being categorized as high-risk –
Bad Credit History
Having a healthy credit score can work wonders for you in so many ways. As a merchant, bad credit history can compel the banking institutions to put your business in a high-risk category. Hence, it’s important to ensure timely repayments of any credit your business owes to the banks.
Risky Product/Service Category
If your business sells products or services that are constantly scrutinized based on legality factors, it’s automatically considered a high-risk business. For instance, CBD products, adult entertainment services, etc. fall under this category.
Merchant Account Termination in the Past
This is obvious but important to note at the same time! If your business account was ever terminated in the past, it adds to the reasons for calling your business a high-risk one.
A Large Number of Chargebacks
A large number of chargebacks or frauds that business experiences, result in high-risk categorization. Financial institutions and payment processing entities deem it to be a high-risk business if they find that it is prone to high chargeback ratios.
Excessive Sales Volume and Credit Card Transactions
If your average monthly sales exceed 20000 USD while your credit card transactions amount to more than $500 – your business is considered a high-risk one.
Another factor that decides the risk category of your business is the presence of multi-currency transactions. If your business operations involve sales and purchases through different kinds of currencies, that’s reason enough to make it a high-risk business.
What is a High-Risk Merchant Account?
A high-risk merchant account is like any other bank account but comes with certain conditions. Banks charge a rolling reserve or high fees as a safety fund against potential chargebacks or frauds.
ALSO SEE – How to Get a High-Risk Merchant Account for CBD Business!
What are the PROS and CONS of a High-Risk Merchant Account?
High-risk merchant account processing comes with some advantages and disadvantages. Here are the major ones:
PROS of a High-Risk Merchant Account
Merchant Account Protection
A high-risk merchant account processor safeguards your account from getting terminated. Otherwise, under usual circumstances, merchant accounts get terminated due to frauds or chargebacks.
Having a high-risk merchant account lets your business operate on a global platform without any hassle. This invites a greater market presence, customers, and profits for your business.
CONS of a High-Risk Merchant Account
The universal drawback of a high-risk merchant account is the high fee you got to pay as a merchant. But as such, that’s something fair as the banks or the processors are covering up for the potential business risks.
Banks charge a rolling reserve from merchants who opt for a high-risk account. This in turn safeguards the banks in case any financial mishaps take place.
Your Search for a High-Risk Processor Ends Here!
Say goodbye to all the worries that your high-risk business brings! Patel Processing is here to revolutionize payment processing and help merchants conduct their business with sheer ease.
Contact us for high-risk merchant account and payment processing services.