What is a High Risk merchant?

High Risk Merchants, in the eyes of Merchant Acquiring Banks, typically include adult entertainment merchants, Internet travel merchants, online tobacco merchants, online pharmacy merchants, replica merchants, online gambling merchants, pre-paid calling card merchants, VOIP merchants, MLM (multi level marketing) merchants and so forth.

Merchant acquiring Banks that underwrite merchant accounts do not generally disclose to businesses applying for their own merchant account why they view the company as high risk, and therefore either decline the merchant account application or impose such high restrictions on the merchant account that make it impossible for the company to accept. These restrictions often times include, large up-front deposits, delayed remittance (payout) cycle, high reserve amounts deducted from the merchants’ card processing, high credit card and transaction fees as well as imposing processing caps thus severely restricting the merchant from being able to reach their processing capacity.

In addition to the product or service being sold on the Internet, the country where the company is registered may be a concern to the Acquiring Bank, and as such deem the business as high risk - especially if the merchant has registered their company in an offshore, tax free, jurisdiction.

The countries where the merchant’s products are being shipped to, or from, often times gives the merchant Acquiring Bank reason to code the merchant account as high risk.

A merchant with previous card processing history that incurred a high level of customer disputes which either generated a high refund rate or, even worse, a high chargeback rate will most likely be considered a high risk merchant.

New e-commerce businesses with high monthly volume sales expectations (i.e. over $100,000 per month) will be viewed by the merchant bank as high risk.

Businesses with high ticket values will also be deemed as high risk business.

Businesses capturing credit card details over the telephone (also known as MOTO – MAIL ORDER TELEPHONE ORDER) are viewed as high risk.

Subscription based merchants are businesses that charge customers on a recurring basis, usually to view specific content on a website or to obtain a monthly subscription of a certain magazine or pill, perhaps. These businesses are also considered to be high risk since customer’s frequently forget to cancel their membership having made an impulse purchase on a certain website. Credit card companies realize that consumers often times legitimately forget to cancel their membership and are happy to reverse the transaction charge from the customer’s credit card. This then becomes a chargeback against the merchants’ merchant account. When a merchant incurs a chargeback level in excess of 1%, against the number of sales for the month, the merchant bank usually terminates the merchant account with immediate effect.

Merchant account holders that have been closed down by their acquiring bank due to excessive chargebacks are put on a TMF list – terminated merchant file. Once a merchant is on the TMF list it is virtually impossible to obtain another merchant account. This business is therefore categorized as high risk, and will likely need to apply overseas for an offshore merchant account or third party account with a new company, new owners/ directors and a new website owner.

Having a recent bankruptcy or having a poor credit rating will also cause a bank to view a merchant as high risk.

CONCLUSION:

Upon reading the above reason codes it is no wonder why many banks decline so many merchant account applications. This should also alert merchants to understand how easy it is to go from being considered a low risk e-commerce business to being a high risk business. Instabill therefore recommend merchants consider applying for more than one merchant account.

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Does Instabill.com differentiate High Risk Merchants?

Instabill.com provides all kinds of high risk merchant accounts. We know the risk and have managed to overcome the barriers that make banks wary of providing card processing solutions to merchants.

Our high risk merchant account solutions are simple and open to all merchants including, pharmacies online, online casino sites and adult oriented merchants.

You can opt for either a third party merchant account [The option to upgrade to a merchant account is always open if your sales increase] or a merchant account depending on your sales volume.

What are the general Rates high risk merchants pay for their credit card processing accounts?

High risk merchant account rates are assessed on a case by case basis. High risk merchants with high monthly sales turnover in excess of $1 million generally pay between 4-5% for their merchant account, whilst start up high risk merchants and, those high risk merchants with low monthly sales turnover (less than $50,000 per month) generally receive rate offerings between 5-7%.

What is the usual timeframe from when I submit my merchant account application to actually receiving a merchant account approval?

Instabill generally receives an answer from one of its’ merchant acquiring bank providers within 3 working days. Upon receiving a merchant account approval notice an Instabill Account Manager communicates all the credit card processing terms and conditions of the bank to the merchant. If the merchant accepts the offer, a merchant account contract is emailed to the merchant for them to sign and return the contract back to Instabill. Live processing can usually start 24-48 hours later.

Our approval rate is 98% and if you think your business will be a success we offer you the chance to prove it!

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