Are You a High-Risk Merchant?
In the processing world, some business types and industries are considered “risky.” Are you one of them? Have you already been turned down by a few credit card processors? Did they tell you that you’re deemed a “high-risk merchant?” Well, all is not lost.
Luckily there are plenty of high risk merchant account providers that specialize in exactly what you need. I’ve only reviewed a handful of them on my site, but they do exist (i.e. Durango (see our review) or PaylineData (see our review)), and they’ll definitely be able to help you out.
Table of Contents
About High Risk Credit Card Processing
The first thing that you need to understand is that while one provider might consider you high risk…another may not. It all depends on their risk department (underwriting) guidelines. If the guidelines are strict, then you won’t get approved. If the guidelines are relaxed, then you’ll have yourself a merchant account. It’s that simple.
Furthermore, if the provider you apply to specializes in high risk merchant services, then you’ve already won the battle. Congratulations, they’ll probably approve you. BUT, keep in mind that there are some providers that don’t specialize in high risk, but still have relaxed guidelines (i.e. Cayan).
What Rates Can You Expect as a High Risk Merchant?
Outlook not so good. 🙁
High risk merchants have to make do with crappier terms and higher rates. That’s just a fact. When you’re caught between a rock and a hard place, you don’t have much room to negotiate.
A word of caution…
Don’t skimp on reviewing the details of your contract. For every 1 ethical and reliable high risk processor, there are about 325 unethical ones that are just waiting to take advantage of you. And, since you are in fact stuck between that rock and that hard place, your judgement might be a bit cloudy. Make sure you read your contract.
Make sure you check for termination fees and other incidentals as well. Do they want you to give them a rolling reserve? If so, how much and for how long? Most high risk processors want some sort of reserve so they can cover their own behind should you close up shop, get a crazy amount of chargebacks or commit some sort of fraud. Keep that in mind.
Why Are You Considered High Risk?
That depends. There are a number of reasons why a provider would consider your business as high risk. Maybe your industry is known for having a high instance of chargebacks or fraud. Maybe you have bad credit.
Are you an offshore business? If so, that places you in the high risk category with some guys.
Does what you’re selling border on the illegal? You’re probably a risk issue.
Are your sales and marketing tactics questionable? I wouldn’t approve you.
As I mentioned above, some providers are more risk averse than others. They don’t want to deal with any business that may pose a bigger threat of losing them money, so they avoid those business types altogether.
What you need to do is find a provider that is willing to work with your business type, that is willing to give you fair rates and that doesn’t forget about you as soon as you sign up. So far, Durango has been pretty damn good in that department, so you might want to check them out.
High Risk Business Types
Here’s a list of some “high risk” business types that might require a high risk merchant account. It is by no means representative of ALL industries, but it definitely covers a large number of them.
- 1-800 type chat sites
- Airplane charters
- ALL sexual oriented or pornographic merchants: (i.e. companion or escort services, adult telephone conversations, adult book stores, dating services, online adult membership or matchmaker services, adult paraphernalia or toys.)
- Amazon, Yahoo or Google Stores
- Annual contracts
- Automotive brokers
- Bankruptcy attorneys
- “Business opportunities”
- Calling cards
- Casino, gambling or gaming
- Check cashing services
- Cigarette or electronic-cigarette sales or nicotine cartridges
- Coins, collectible currency or autographed collectibles
- Collection agencies
- Coupons or rewards-points program
- Credit or debt repair
- Credit counseling
- Credit protection
- Debt collection
- Direct selling
- Discount health – medical care programs
- Debt consolidation
- Drug paraphernalia
- eBay Store
- E-Books (copywrited material)
- Event ticket brokers (unlicensed – non registered (i.e. Stub Hub type merchants))
- Exporting services (non US based)
- Fantasy sports websites
- Federal Firearms License (FFL) dealers
- Finance broker, financial consulting or loan modification services
- Indirect financial consulting (i.e. How to Save Money by Lowering Your Electric Bill.)
- Financial planning, strategy or advising
- “Get rich quick” – books, programs, etc…
- High average tickets
- “How-To” type websites (i.e. “Learn How-To Make Money on The Internet”)
- Horoscopes, astrology or psychic services (i.e. fortune tellers)
- “Hype” products or services
- Hypnotists or self-hypnosis
- International merchants (non US based)
- International shipping, cargo or import/export
- Investment firms
- Investment strategy
- Investment books
- Lawyer referral services
- Life coaching
- Lingerie sales
- Magazine sales and subscriptions
- Mail order
- Membership organizations (over 12 months)
- Merchants on the terminated merchant file (TMF list)
- Modeling agencies
- Multi-level marketing (MLM)
- Music, movie, software downloads or uploads (ie. copywrited music, movies or software (i.e. Microsoft office))
- Non US citizens
- Off-shore corp. establishment services
- Pawn shops
- Poor credit
- Prepaid debit cards
- In-bound or outbound telemarketing services
- Real estate
- Replica handbags, watches, wallets, sunglasses etc… (knock-offs)
- Self defense, pepper spray, mace, etc.
- Seo services
- Social networking sites – Facebook, Twitter, MySpace etc…
- Sports forecasting or odds making/betting
- Talent agencies
- Telephone companies
- Telephone order
- Third-party processing, factoring merchants (i.e. payment processors, vacation rental brokers)
- Time-shares or time-shares advertising
- Tour operators
- Travel services
- Travel agencies
- Travel clubs
- Vacation planners
- Vacation rentals (unless property is owned by merchant)
- Vitamin and supplement sales – diet pills, prescription pills, health supplements, pharmacy
- Voip services
- Extended warranty companies
- Weapons of any kind – guns, knives, stun guns, or ammo. Includes any parts of weapons (i.e. butts, triggers, magazines, etc.)