A Guide to High Risk Merchant Accounts
High risk merchant account is type is offered by a bank or by a financial institute to businesses who would like to accept payments from the credit and debit card of their customers. When businesses apply for a merchant account they will need to pay more for the fees, however this will add to the expenses of the business. There are actually businesses who works with merchants by providing them a faster payout, a reserve rate, a competitive rate and a fast payout. This is very helpful to businesses that are having a very hard time in looking for a place to do their business.
A business will only be considered as a high risk business is when they deal and work with operations that are difficult. Here are examples of high risk businesses; car rentals, bail bonds, legal offline, collection agencies, travel agencies, online gambling and other businesses that operates online and offline. Banks and financial institutions requires these type of businesses to apply for a high risk merchant account since they have a hard time in working and processing payments with these type of businesses. A merchant account and a high risk merchant account has different fees.
The merchant account is a bank account but it is just like a line of credit, since this will allow the businesses to get payments from the debit and credit card of their customers. The bank that offered the merchant account is called the acquiring bank, then the bank that provided the credit card is called the issuing bank. Gateway is another important factor in the process, since it will transfer the transaction of the customer to the merchant.
The acquiring bank can also let the merchant apply for a high risk merchant account. In the case of a high risk merchant account, there are additional worries about the integrity of the funds, and the possibility that the bank may be financially responsible in the case of any problems. That is why high risk merchant accounts have more financial safeguards. The bank holds the funds for a longer time to avoid any fraudulent transactions.
Payments that are made in a high risk merchant account has a higher risk of experiencing charge backs, fraud, refund and reversal. Online businesses is considered as a high risk business since they could encounter fraud because they cannot see the imprint credit card of the customers.
Before a merchant could apply for a merchant account there are certain things that must be taken into consideration. Before a merchant should choose a high risk merchant account provider, he or she must negotiate to have a much more lower rate and many more things.