Ever wondered why your bank is not granting your business a merchant account? Or is it strange why other businesses don’t have trouble being granted with credit card payment options while you are getting denied by your bank? If all of these circumstances fit your current situation, then chances are your business might be considered ‘high risk.’
For high-risk businesses, it can be hard to land a reliable, safe, and unprejudiced high-risk credit card processor. Even if these businesses do find one, they will be charged with extremely high rates. These rates still doesn’t include the unfair terms that you have to undergo. So, as high-risk business looking for a legit credit card processor, what can you do?
What is a High-risk Merchant?
Before we proceed, let’s first briefly discuss what exactly a high-risk business is and why credit card processors are reluctant to do business with them. Commonly, there are a lot of factors that need to be considered for a business to be called ‘high risk.’ However, it is generally based on two primary conditions: it either falls under a high-risk industry, or fall under the industry where the risk of financial failures is high. Selling weapons and firearms, for instance, would fall under the first condition. A business that belongs in perilous industries like e-cigarette comes with high amounts of chargebacks, making it financially risky. Small businesses, on the other end, are considered as risky if their revenue is less than $1 million per year.
There are a lot of businesses out there that aren’t even aware that they are at risk. This is going to be a problem since they will have to pay higher fees for the payment processing service. You can be one of those businesses that are unaware of them being high risk.
Why Processors Deny High-Risk Businesses
Your credit card processing company is in charge of all the negotiations that go through your business. For this reason, they will less likely work with a business that has a lot of problems. This would include fraudulent businesses or businesses that have chargebacks. Most processors would feel that it’s not worth the trouble to even engage with these kinds of businesses.
Is Your Business High Risk?
Again, there are a lot of factors that would be determined before a business is judged as high risk. If you, for instance, own a start-up business, and it possesses poor credit or is under flawed industries, then your business is considered high-risk.
Here are some solid examples of high-risk businesses:
- Adult-oriented Industry
- e-Commerce
- Financial Services
- Gambling
- Health & Wellness
- Anything adult-oriented
- Tobacco
- Gambling
- Financial services
- Legal services
- Software
- Travel and hospitality
This isn’t a complete list, but if your business falls under these categories, then it is undeniably a high-risk business. If it’s not, you should do a lot more research to find if your business is high risk or not.
Be Aware of your Business
To recap everything, high-risk businesses are always at risk of being denied by their banks and credit card processor. This is why it is very crucial that you determine whether you are high risk or not. If you are not a high-risk business, then great. However, if you do fall under high-risk, then make the necessary adjustments to show processors that your business is legit.
