Who Needs a High Risk Merchant Account?
Merchant accounts are required in order for a business to accept credit card payments. As a merchant, there are two places you can obtain a merchant account; a bank, or a third party provider. For online merchants the most popular, and in most cases high risk merchant account cost effective, source is from a third party merchant account provider.
A high risk merchant account is required by businesses that, when compared to a ‘traditional’ goods/services business, are at a higher risk of:
High volume of sales
High rate of refunds
High rate of charge-backs
Other reasons a merchant may be categorized as a high risk are:
Merchants Location – Some merchant account providers will not accept merchants from certain countries.
The Product/Service the merchant sells is illegal in some jurisdictions.
Merchant Credit History – Some providers will not accept merchants with poor or no credit history.
Due to the high risk classification, most banks will not provide a merchant account to those in a high risk industry (such as adult entertainment, replica goods, pharmacy etc). As such some third party providers offer their services to both general merchants and high risk merchants.