Tips on Applying for a High Risk Merchant Account


Applying for a merchant account is an important step in starting or growing a business.  When starting your search, there are some important tips on applying for a high risk merchant account you need to know about when selecting the right high risk processor.

Avoid low risk processors and ask questions

One of the most common mistakes a merchant can make is to not understand that their business is considered high risk, or they may not know that every processor is not able to approve every business type.  There are many low risk processors and tens of thousands of agents out there with different skills and knowledge of the industry, but most do not have any familiarity with high-risk merchants.  Merchants will fill out applications and may even get approved in some instances, only to find within a month or two they have lost their merchant account.  This can sometimes make it harder to obtain a real account.  Merchants need to do their homework and ask the right questions.

Companies may provide merchants with little knowledge and rush them to fill out applications

When speaking to my merchants, I hear all the time that they were asked to fill out the application and told “don’t worry”.  This is a huge red flag.  Questions need to be asked regarding credit, finances, and what type of volume the merchant wants to process.  Along with this, it is important to educate merchants on what to expect, how long the process will take, and what can hold it up. Also, an examination of the website is needed to make sure it is compliant.  None of this takes very long, but all too often these steps are missed in the haste to “close a deal”.  Educated merchants will always prosper in the long run if the time is taken to explain the credit card processing industry to them.

Understanding Chargebacks

Visa and MasterCard have set the industry standard for chargebacks at 1%.  That might seem very low – and it is – but there are many other factors involved which can change the dynamics of this situation.  Large processors may have a lot of low risk accounts to offset their higher risk ones.

In plain English, a large processor’s overall portfolio of chargebacks may be under 1%, thus allowing some leeway for the higher risk merchants that go over that threshold.  All processors are different, and it is important that you have someone who knows the industry to be your guide and explain the complexities of a merchant account that is considered high risk.

Most merchants think that if they win a chargeback, it does not count against their percentage, but this is not true.  While is does help to fight and win chargebacks, they will still count in your monthly percentage, unfair as it may seem.  I tell merchants all the time that when in doubt, give a refund.  It is not worth the chargeback even if you feel you are 100% correct.

Limitless Payment Solutions works to provide the correct processor for all of our high-risk merchants.  Our commitment to our merchants is that we will always take the necessary time to explain the industry in great detail.  We also ensure that merchants completely comprehend the chargeback policies, and we do our best to guide them through the entire process.  Following these tips for getting a high risk merchant account will ensure that before you start the application process, you have the correct information you need to be successful for years to come.