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Merchant Account Guide

The Advantages and Disadvantages of High-Risk Merchant Accounts


As a business, you will need to obtain a merchant account before accepting credit card payments from your customers. An acquiring bank will classify your business type as either high risk or low risk. High-risk businesses pose a threat, and most credit card processing firms tend to avoid them. In case you have riskier sales methods, are selling internationally to certain nations, have a higher average amount of individual transactions, sell certain types of products or services; you will realize that your business has been assigned a higher risk rating. Go to for more info.


Being labeled high-risk has some potential advantages and disadvantages. First, let's look at the disadvantages of being labeled high-risk. Rolling reserves- high-risk payment processors will definitely require a merchant account reserve. The acquiring bank will require that the merchant account is funded in the event of emergency situations. The acquiring bank uses this reserve to cover their behinds in case a chargeback is filed against your business, and you are unable to reimburse the bank.


Most high-risk merchants require a rolling reserve. A portion of your monthly sales will be held in the merchant's account for some time then released after a given time has elapsed. Depending on your business income, 5-10% of your monthly sales are held for a period of 180 days before being released. In as much as the held funds still belong to you, the restricted access could cause a dent in the business cash flow. Check out for more details.


Increased fees. Expect extra charges and fees; though know how to differentiate between fair and overrated charges. You can do this by calling different payment processing companies and getting their quotes. Keep an eye out for the set-up fee many high-risk payment processing firms usually inflate this fee. You might additionally see a little higher monthly fees as well as processing fees. All in all, it pays to compare the cost of different payment processing companies.


Some of the advantages of high-risk merchant accounts are discussed below. You will be less threatened by chargebacks. Even though traditional merchants may enjoy processing fees, and lower chargeback, they are vulnerable to excessive chargebacks compared to high-risk businesses. The main difference is because you have set up with the bank to compensate for the issue, on the other hand, the low-risk bank risk having their account entirely terminated.


Another benefit is that there isn't any limit on your earning potential. You are able to accept recurring payments, and this can enable you to realize possibility for long-term business growth. You likewise don't have to be worried of the revenue cap imposed on your monthly earnings. To read more about this, go to