High Risk Merchant Accounts: An Overview
When your business is categorized as "high risk," you'll require a high risk merchant account. Many business owners don't realize their business model falls into this category until they face repeated rejections from big banks for payment processing applications.
Don't lose hope – specialized high risk payment processors exist. They're not only qualified to set up payment processing for your business but are experts in catering to your specific industry needs within your high risk vertical.
Why High Risk Merchant Accounts Cost More
High risk merchant accounts typically cost more than low risk accounts for several reasons:
Traditional banks and big lenders often avoid high risk merchants due to the increased potential for financial loss.
Payment processing companies willing to work with high risk businesses assume more financial liability.
These companies generally have broader underwriting allowances and may conduct in-house underwriting to better assess risk.
The additional costs for high risk merchant accounts come out of your bottom line to offset the risks associated with offering your business payment processing options.
Factors Affecting High Risk Merchant Account Costs
The cost of a high risk merchant account varies widely depending on several factors:
- Credit score
- Chargeback ratio
- History with other processors
- Industry regulation level
- Payment structure (e.g., recurring billing model)
Due to these variables, it's difficult to provide a general cost estimate. Many providers, including PayKings, offer fast, free quotes for more detailed, business-specific information.
Keeping Costs Low
While high risk merchant accounts generally cost more, there are ways to manage expenses:
Shop around: Different payment processing companies have varying standards and underwriting abilities. What's high risk to one might be moderate risk to another.
Compare rates: Some processors offer reasonable rates for high risk merchants without compromising service quality. PayKings, for example, offers competitive rates and specializes in various high risk verticals.
Improve your risk profile: Work on factors within your control, such as improving your credit score or reducing your chargeback ratio.
Choose the right provider: Look for processors experienced in your specific industry. They may offer more favorable terms due to their understanding of your business model.
Remember, while eCommerce is crucial for business success, it comes with associated costs. The key is finding a balance between cost and quality of service.
Conclusion
While high risk merchant accounts do come with higher costs, they're essential for many businesses to operate in the modern economy. By understanding the factors that influence these costs and shopping around for the right provider, you can find a solution that allows your business to thrive while managing expenses effectively.