Who needs a high risk trading account?
Merchant accounts are required for a business to accept credit card payments. As a merchant there are two places you can get a merchant account; bank or third party provider. For online merchants, the most popular and, in most cases, cost-effective source is a third-party merchant account provider.
A high-risk merchant account is required by businesses that, compared to a “traditional” goods/services business, are exposed to a higher risk of:
- Fraudulent transactions
- High volume of sales
- High recovery rate
- High chargeback rate
Other reasons for a trader to be categorized as high risk are:
- Merchant Location – Some merchant account providers will not accept merchants from certain countries.
- The product/service sold by the merchant is illegal in some jurisdictions.
- Merchant Credit History – Some providers will not accept merchants with poor or no credit history.
Due to the high-risk classification, most banks will not provide a merchant account to those in a high-risk industry (such as adult entertainment, replica goods, pharmaceuticals, etc.). Because of this, some third-party providers offer their services to both casual traders and high-risk traders.
Merchant account providers that are designed to serve high-risk merchants typically provide a higher level of fraud protection to reduce the costs their merchants incur. However, to cover the higher level of risk, the rates for a high risk trading account will always be higher than a lower risk one.
When looking for a high risk trading account, there are a number of factors to consider. Fees will be one of the most important factors and this includes fees for refunds and chargebacks, along with transaction fees, discount rate and ongoing fees. Next, you’ll need to consider fraud protection, customer service and reporting available to you as a merchant.
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