high risk merchant account

What is a high risk merchant account?

A high risk merchant account is a special merchant account created expressly for merchants deemed high risk; the merchant account makes it possible for those types of merchants to accept credit cards just like any other business would.  Processing markups may be higher than average with a high risk merchant account, as processors either want more money to use to protect themselves in the event something bad happens to your business.

Why is your business considered high risk?

A business or industry will typically be considered high risk if it’s involved with a good deal of chargeback activity.  (Chargebacks are undesirable for everyone–you as a business owner, your customer, and your processor.  Processors get reprimanded sternly–in the form of a fine–if they take on too many chargebacks, so, to curb the potential for a big fee at the end of the month or the year, some processors elect to charge more.)  Thus, if your industry’s processing is typically involves a higher number of chargebacks, the fees for that industry will typically be higher.

Why do chargebacks occur?

In some legitimate cases, a customer will actually lose his/her credit card, not receive a refund for a purchase, or something like that.  Mistakes and other uncontrollable events happen.  But, a good percentage of the time, customers will initiate a chargeback, simply because they can.  Maybe it makes it easier to save face when a certain credit card activity statement arrives.  Maybe the item the customer bought took too long to arrive, or, in the intervening period between the purchase and the item’s arrival, someone changed their mind (or changed their plans or itinerary).  Here’s a (non-comprehensive) list of some industries that might be considered high risk and why their customers might charge something back.

  • Chat or webcam sites (potential for embarrassment on a monthly statement; hard to prove the service was given since it’s intangible)
  • Airplane charters (occasional long wait between the charge and the service; plans change)
  • Sexual or adult content of any kind (potential for embarrassment)
  • Bankruptcy attorneys (embarrassment)
  • Limousine service (alcohol sometimes makes parties forget they ordered service at all)
  • Gambling (embarrassment)
  • Firearms and paraphernalia (banks are sometimes criticized for doing business with these merchants)
  • Hypnosis (hard to prove service was rendered)
  • High risk investments (good chance of failure; transactions can be very large)
  • MOTO businesses (card necessarily isn’t present; easy to falsely say the transaction was fraudulent)
  • Vitamins and supplements (hard to prove they’re effective)

And the list just goes on and on… It’s not absolutely a given to be considered high risk, but, obviously, it isn’t something you can easily sidestep.

Century Business Solutions offers merchant services to many high risk industries, providing: