A Guide to High Risk Merchant Accounts
The high risk merchant account is a kind of account that must be approved by a financial institution or by a bank. This account will allow businesses to get the payments of their customers through their debit or credit card. The merchant will need to pay more for the merchant services, this will add to the costs of the business. There are some businesses who service merchants. They will help them by providing a fast payout, a low reserve rate and a competitive rate. This can help businesses who cannot find an area for their business.
When the method of a business is difficult the it is considered as a high risk business. 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. It is quite difficult for banks and financial institutions to deal and receive payment from high risk businesses they ask them to apply for a high risk merchant account. The fees is the main difference of a regular merchant account and a high risk merchant account.
The merchant account is also a bank account but it is a line of credit for businesses, so they receive the payments from the credit and debit 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. There is another important factor with the process and that would be the gateway, this gives the transaction information of the costumer to the merchant.
The acquiring bank can also let the merchant apply for a high risk merchant account. The bank could be at fault when the business will have financial problems, this is one of the problems that might be encountered by the bank. That is why high risk merchant accounts have more financial safeguards. They do these so they could avoid any type of fraudulent transaction.
Payments that are made in a high risk merchant account has a higher risk of experiencing charge backs, fraud, refund and reversal. Online companies has a risk in experiencing fraud, since they do not get to see the imprint credit card of their customers.
There are things that should be considered before a merchant could apply for a merchant account. It is best if the merchant will ask for a much lower rate before the merchant should choose a provider for a high risk merchant account.