July 24, 2021


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Am I a high-risk merchant? And is that a bad thing?

Risk assessment or measuring the risk concept with high precision caliper tool on laptop keyboard

Ever been told that sometimes in life, you have to trust your gut and go for it? Well, not when it comes to your online business.

Before taking that leap into opening a merchant account, it’s fundamental to find which category you belong to. Be it a high or low-risk merchant, the final decision ultimately falls into the hands of the acquiring bank. Each merchant account provider has its criteria to determine which journey your business undertakes in terms of potential risk.

What is a high-risk merchant?

A high-risk merchant account is a specific account intended for those businesses that are considered to be of high risk.

As they are more prone to chargebacks, they will come with the need for paying higher fees than others who fall into the low-risk category.

Critical indicators for high-risk Merchants include:

  • Average monthly sales volume of over 20,000
  • Average credit card transaction of over 500
  • Multiple currencies accepted
  • Recurring payments accepted
  • History of chargebacks
  • Established, or selling to countries with high levels of fraud

Another key factor may be the type of product that you are selling or the service you are providing.

If your business falls under the high-risk level, it’s not explicitly the end of the world, but it will be a bit more challenging to have a merchant account approved for you.

The bitter reality is that high-risk merchant accounts are more expensive than low-risk ones. There are specific unavoidable fees that you will encounter, including processing charges and account fees. In addition to the influences that come with having a high-risk business, you should be wary of payment processors that offer competitive rates custom-made for your specific business.

Another vital aspect of your high-risk merchant account is the rolling reserve. It’s an insurance that the bank charges to protect itself from chargebacks or unanticipated occurrences that may happen. A certain amount of your card processing volume is blocked and held for a period up to 6 months, after this period has passed, the amount blocked will be released back to you.

Due to your risk level, the acquiring bank usually determines the percentage that is held.

There are many rationalisations as to why your business may be considered high risk, that is why when opening a merchant account you should always do your due diligence to see which best suits your necessities.

Fido Merchant Services (www.fidoms.com) is anOnline merchant services provider that can help your company to process cards online. They provide accounts for Merchants registered in Europe and USA and have very competitive rates.