High Risk Merchant Accounts
BankCard USA specializes in game-changing credit card processing solutions for merchants considered high risk.
High risk merchant accounts are designed to accommodate businesses that are financially unpredictable, prone to chargebacks or pose a certain degree of potential loss to merchant service providers and banks. When a merchant service provider (MSP), also known as a merchant account provider, merchant processor or acquiring bank, partners with a merchant, it serves a few main purposes: the first, and perhaps most obvious, is providing credit card processing equipment, software and services that move credit card payment funds from the cardholders’ banks to the merchant’s bank. The second is interacting with banks and credit card companies on the merchant’s behalf because the transaction process entails an authorization and settlement process involving several parties. The third is signing on as the merchant’s financial guarantor in a way. If the merchant runs into trouble with excessive chargebacks, fraud losses or other setbacks it can’t afford to cover, the MSP is on the hook to repay the lost amounts to banks and credit card companies.
Each merchant-MSP partnership is backed by a sponsor bank, who also has a say in the investment to provide credit card processing services. So, when businesses apply for a merchant account, MSPs typically categorize them as low risk, mid risk and high risk to gauge if and how they can serve them and protect all the involved parties from potential liabilities.
By looking at a merchant’s industry, business type and history, the MSP can predict problems that might stem from processing its electronic transactions. It’s kind of like giving them a report card. There are different grades that determine overall performance. The better the overall GPA, the more college options and scholarship opportunities a student has. Grades aren't the only factors; the student may be high performing in other areas, like sports or volunteer work. Similarly, low risk merchants typically have the most options for credit card processing services at the lowest rates. High risk merchants are usually subject to fewer options and tighter terms to accept credit cards, and rates are variable depending on their performance in the different areas of interest. If they meet extreme high risk criteria, like current illegal operation, they won't be able to accept credit cards at all.
High Risk Factors:
- No, low or erratic credit scores. Business and business owner’s credit scores are evaluated.
- No experience accepting credit cards. When there’s no baseline to measure off, MSPs exercise more caution.
- The business owner has fraud or illegal activity of some kind on its record.
- The business sells internationally.
- What some banks call “reputational risks.” This just means that the business sells controversial or edgy merchandise that some banks simply don’t like to be associated with (e.g. glass pipes and adult products).
- “Regulatory risks.” When an industry is heavily regulated, there’s a higher chance of its members breaking laws and regulations and becoming subject to fines and closure. Some examples are businesses that sell firearms, alcohol, tobacco and e-cigarette/vape products.
- Online or mail order/telephone order (MOTO) transactions. Even if a business is considered low risk by all other criteria, accepting card-not-present transactions inherently poses a higher risk of fraud and chargebacks.
- High average ticket sizes. Losses like chargebacks are magnified when the business sells expensive products or services.
- Being on the MATCH List (Member Alert to Control High Risk Merchants). Previously known as the Terminated Merchant File (TMF), the MATCH List is a blacklist managed by MasterCard and shared among MSPs to keep them on the same page about merchant reputations and account histories.
- History of excessive chargebacks. High chargeback ratios indicate that there’s something off with the business’s products, customer service, or both.
MSPs take all of these factors into consideration when they screen applicants. Chargebacks are detrimental, and fraud poses both a financial and legal risk. Fraud losses from an external security breach can cost thousands to millions of dollars to cover. When fraud or any kind of illegal activity comes from within the business itself, it’s illegal for us to provide credit card processing services.
The Good News
Some high risk factors vary from provider to provider. Some banks won’t partner with businesses in certain industries, like adult entertainment, even if they have excellent credit and meet all of the other criteria for a merchant account, simply because of the brow-raising nature of the field. However, BankCard USA considers merchants from all industries on an individual basis. Accepting credit cards doesn't have to be a profit-eating hassle when you find the right provider.
We look at credit, chargeback and bankruptcy history, but understand that businesses can recover from those setbacks. Rather than decline them on the spot, we delve further into the details of what they’re doing to get back on track and consider how we can help. We offer built-in chargeback prevention tools, fraud mitigation packages, merchant reserves, professional guidance and more to enhance business performance and credibility when we enter a partnership—and regularly take on merchants other banks turn down.
If your business meets one or multiple high risk criteria listed above, accepting credit cards online or in a retail setting is still viable. We offer market-leading POS systems, credit card terminals and payment gateways customized with features to keep your high risk business operating smoothly and efficiently. In addition, we offer level II and III enhanced data processing for B2B merchants at a specialized low rate.
High risk industries/business types generally include:
- Antiques and collectibles
- Bad credit
- Bail bond
- Debt collection and debt consolidation
- Document preparation
- Extended warranty
- Fantasy sports
- Firearm and ammunition
- High average tickets
- Hotel and lodging
- Magazine subscriptions
- MATCH List/TMF merchants
- Multi-level marketing
- Online dating
- Online gaming
- Recurring billing
- Self-service/kiosk payments
- SEO services
- Skin care products
- Supplements and nutraceuticals
- Timeshare litigation
- Travel and tour
- Trial and free offer
- VoIP and telecommunications
Industry Specific Support
Every applicant is considered on an individual basis with considerations of their business type and other relevant factors. For example, a high ticket, low volume business calls for special consideration. Chargebacks are measured by a monthly ratio, so if a merchant has one chargeback in a month with 100 transactions, their chargeback ratio is 1%. Sometimes, low volume businesses with high average tickets run into problems. If they only process 5 large transactions in a month and incur one chargeback, their ratio is off the charts (2% is considered high!). We regularly approve applicants with higher than average chargeback ratios and provide the tools necessary for improvement.
Our experience with individual high risk industries allows us to identify potential avenues for fraud and payment disputes, then assist in sealing them before those setbacks occur. Our PCI compliance team is here to walk you through the annual self-assessment questionnaire (SAQ), and we schedule free vulnerability scanning for ecommerce and IP-connected terminal merchants to ensure they're operating with a safe internet connection. Furthermore, if your vulnerability scan comes back negative, we walk you through the remediation process step by step so that your business is up to date with security best practices.
Accepting credit card payments online through an ecommerce platform is an area of our expertise. Some merchant account providers inflate rates because of the general risks of selling online. Even if you have a great processing history and don't sell high risk products, online payments expose your business to higher chances of fraud and chargebacks. Instead of charging exorbitant rates, we fortify your business with the tools needed to combat those potential losses. With every high risk merchant account we set up, we dedicate end-to-end support so that your online payment gateway is equipped with advanced fraud detection filters and thresholds, chargeback prevention features and seamless integration with your shopping cart and other software—all under a low rate guarantee.
Our credit card processing equipment and software are designed to not only enable you to accept credit cards online, in store or over the phone, but also take advantage of automated invoicing, online reporting, accounting reconciliation, inventory tracking and more.
BankCard USA has 25 years of experience serving an array of high risk merchants. In a free consultation, we can review your current processing statement and show you exactly what you can save with our merchant services. We also regularly partner with startups, and consider MATCH List merchants on an individual basis. With a high risk merchant account from BankCard USA, you don't have to settle for high transaction rates, subpar services and hidden fees other providers tend to exploit because of the high risk flag. In fact, our low rate guarantee means that we will beat the rate of any verified provider.