High Risk Merchant Processing

A merchant is classified as high risk based on the type of industry, offline or online operations, business location and size, credit card history, and chargeback ratios. High-Risk merchant processing accounts are mostly used for transactions involving gambling, forex trading, adult material, pornography, telemarketers, and adult-themed websites. These businesses are likely to go bankrupt in the long run as there are no assets to pay back their debts. The products and services provided by these firms are questionable and the chances of failure of their business are higher. The formula of high-risk merchant processing accounts is simple, the more the chargeback greater is the risk. 

High-risk merchant processing as the name suggests involves high risk due to more chargebacks. A high-risk merchant processor should keep a chargeback ratio lower than 0.9% of your total transactions. These merchants are required to have a good reputation and processing history to survive in the market. A merchant is classified as a high-risk merchant processor if the sales volume is above 240,000 USD annually, the average credit card transaction is USD 500 and if the products are to be sold in high-risk fraudulent countries

The high-risk merchant processing does have a brighter side as well, there will be increased sales volume allowances, recurring billing, and multi-currency options. A business is classified as high-risk only when there have been excessive chargebacks.

High-risk merchant processors get themselves into this high-risk business and help the inflow of money and material. The chances of fraud are higher. Take the adult entertainment industry, the customer may ask for chargeback stating he has not visited the websites, similarly, there are increased chances of a chargeback in the travel industry, as the cancellation can happen anytime and the customer will request for the chargeback.

As discussed, chargebacks are the main criterion for the classification of high-risk and low-risk merchants. The merchant processors have a chargeback monitoring program and are provided a grace period to settle on financial matters. When there are increased chargebacks the merchants are tagged as a high-risk merchants and are subjected to excessive fees. High-risk merchant processors are required to pay heft monthly fees when compared to other merchants. The chargeback monitoring program will be in place to monitor all the transactions.

The high-risk business merchants can accept the credit payments but they will be subjected to higher processing rates. The increased risk of chargebacks and fraud increases the processing rates. Another hurdle with the high processing merchant accounts is the bank’s right on the reservation of business credit card processing. It is also possible to reclassify the high-risk business account based on the chargebacks and refunds. The reclassification can be done based on a good credit card processing history of at least 6 months or a lesser number of chargebacks and refunds. The reclassification is not easy as it sounds the chargeback ratio has to be less to be eligible. High-risk merchant processing comes with its pros and cons.