There are many benefits of having a high-risk merchant account. High-risk merchant accounts have unique features that conventional merchant accounts do not have. However, it is important for merchants to choose the right high risk processor for their industry.
To begin with, high-risk merchant account providers have more leniency when it comes to chargebacks. Traditional processors will drop a merchant that has a charge back ratio of more than 1% whereas a high-risk provider is much more forgiving.
High-risk accounts also go through more risk analysis than low risk merchants do. They will ask for more documentation, including finances for the prior 3 months. In some cases, when a merchant asks for more than $80,000 in monthly volume, they may want to see up to 2 years of tax returns. Having a more detailed risk portfolio allows for processors to be more tolerant of chargebacks that rise above of 1%. High-risk processors understand that certain industries are prone to having a high incident of chargebacks.
Another difference between a high risk merchant account and a conventional merchant account is that high risk merchants must have a reserve. Some merchants are turned off by this, thinking that having a reserve is a disadvantage. However, a reserve offsets the risk of an account and all the reserve money is returned to the merchant. Reserves for a high-risk account usually range from 10% to 20% of each credit card deposit, with 10% being most common. In some cases, merchants with a long history could be approved for a reserve as low as 5%. The most typical reserve is 10% with a 6-month rolling reserve.
High risk merchant accounts often have a higher rate than traditional accounts, but this too can be an advantage. Having a low rate for a high-risk industry is not as desirable as it seems. If a processor is not making a lot of money on a high-risk account when high charge backs occur, they will drop them. Don’t be rate sensitive when seeking a high risk merchant account, merchants with higher rates are less likely to be dropped by their processor. A higher rate may be your best friend in the end.
Limitless specializes in high-risk merchant accounts. We ask the right questions and are able to help you through every step of the process. It is our goal to get your business up and running as quick as possible. Give us a call today at (800) 971 – 6221 or us the easy apply now and let’s get your business approved!