Important Note:

 This information is for educational purposes only. Advantage Processors has no trouble getting merchant accounts setup for highest risk business. We generally have a solution for everyone and the easiest way to get started is to fill out our simple merchant application form to get started.

What We Focus On

Some businesses expose financial institutions to higher amounts of risk than the typical retail establishment.  The service high risk refers to problems in one or more steps of the processing such as frequent incidences of credit card fraud, dissatisfaction with service, or other problems that have been found to occur frequently with a particular industry.  

Types of Risk

Fraud risk is the risk of inadvertently processing credit card transactions that have not been authorized by the credit card holder. Credit card fraud typically occurs as the result of stolen cards or card numbers. New merchants are at great risk since they are not as familiar with the methods of detecting and preventing suspicious credit card transactions.  Other business merchants may also be at a greater risk because they sell items that are popular to buy with a stolen credit card, such as prepaid phone cards or adult entertainment material.  These are the businesses known as high-risk for credit card processing.. is the greatest risk associated with the merchant account. It not only includes the risks associated with fraud but also all the unforeseeable risks associated with different types of businesses and marketing methods.

Financial institutions are also highly sensitive to contingent liability risks.  This means the customer satisfaction relies on the business being able to continue to perform some action in the future.  Lifetime services or products represent the worst-case scenario when it comes to contingent liability. For example, offering customers a one-time 'lifetime membership' fee for unlimited access to your website makes merchant account institutions increasingly uncomfortable.  The liability just grows and grows with each new sale and the amount of refunds a merchant would have to pay if their business went under becomes astronomical.  Another form of contingent liability is associated with intangible services.  In general, the more fleeting the service or product, the greater the risk, because it is extremely difficult or impossible for the merchant to provide proof of delivery.

Examples of These Businesses

In general, you will find it almost impossible to get a merchant account for these types of businesses:
-  check cashing establishments
-  collection agencies
-  gambling sites
-  hair restoration services
-  travel reservation business
-  investment opportunities
-  magazine subscriptions
-  mortgage brokers
-  prepaid phone cards
-  telephone consultation services

Other examples of businesses that usually require higher setup and transaction fees::
-  adult entertainment websites
-  chat rooms
-  horoscopes
-  internet movies 
-  online magazines
-  online pharmacies

Additional Fees and Reserves

The banks consider certain types of business high-risk because of a history of too many chargebacks, returns, possible legal problems for selling certain things, or bad publicity the bank will incur for associating with certain types of businesses.  As mentioned above, as a forbidden business, you may be required to pay higher setup and/or transaction fees to counteract the risk of processing money for your business.  In addition, a reserve may be required.  The actual total amount of the reserve and how the reserve is established will vary from bank to bank and from business to business depending on the extent of risk exposure. Although merchants often think of reserve requirements as negative aspect of doing business with credit card processors, reserves can act as a safety net for businesses to reduce their liability.  Reserves are usually a percentage of the monthly charge volume and are created by withholding a percentage of each transaction for an agreed upon duration.  Furthermore, reserve amounts belong to the merchant.  They are held in escrow by the bank in the event they are needed to offset unexpected chargebacks.

Aside from deciding whether the type of business you do is high-risk or not, banks and financial institutions that provide merchant accounts will also look at how long you have been in business and your credit history to decide on the terms and conditions they can offer you for credit card processing.  If you have been in business for a long time, they know you will have more expert knowledge on how to look for fraudulent purchases and how to provide good customer satisfaction so they don't have to deal with a lot of returns and complaints.  A good credit history will help establish your credibility for repaying loans.  

Even if you have to pay additional fees to set up a merchant account, you should still strongly consider the advantages of having one.  Customers will be able to complete impulse purchases, and customers who don't have a lot of experience with the internet or internet shopping in particular will not be turned away because of confusing or hassling payment methods such as using intermediary payment methods, electronic checks, or mailing in checks.  On top of that, a website that doesn't accept credit cards screams 'amateur'!