In today’s competitive marketplace, it is impractical to refuse payment by credit and debit card. However, people in certain trades that are deemed risky may find it hard to get a merchant account to process those cards. You can be labels High-Risk for all sorts of reasons. If you sell legally questionable goods like smart drugs, or have suspect marketing or trade practices, or even if your Industry has a high fraud rate, you can be labeled high risk. Fear not, there’s an entire group of processors and lenders who specialize in High-Risk Merchant Accounts ready to help you. However, there are also a lot of scammers present ready to pounce on high-risk clients looking for a good deal. As a result, it’s essential to remember these five things when you look for a new high risk merchant account.
You Get What You Pay For
A High-Risk Merchant Account will always cost more then an ordinary Merchant Account. This is because the bank takes greater risk on you. Be prepared not only to pay the usual percentage that Merchant Accounts extract, but an additional monthly fee as well. As a rule expect to pay about twice as much as a normal Merchant account would cost. While legitimate processors might still offer reasonable rates even for High-Risk, be wary of anyone offering super low prices. This is probably a scam.
Expect Contract Restrictions
While normal merchant accounts come with the space to negotiate length and a number of other factors, don’t expect the same treatment for a high risk merchant account. Among High-Risk bankers right now a standard contract is three years mandatory with a rolling renewal clause. Elsewhere, this can be as high as five years. Be wary of any processor that offers you better terms. Once again, this is a way for the processor to protect their investment.
Have A Rolling Reserve
One of the easiest ways to determine whether a high risk merchant account is real, or a scam is if it includes a rolling reserve. This means that the processor holds on to a percentage of the money for a certain amount of time before releasing it to you. The time frame may vary depending on the merchant’s risk assessment tools. You should expect the processor will want to keep 5% for about 6 weeks. This might be hard for cash-strapped business’, but it helps the processor get comfortable with your account.
If It’s Too Good to be True, It Is
Keep an eye on what the processor says or does to convince you to open an account with them. A lot of things that seem like good deals can turn out to your detriment. For example, if the processor offers 24-hour phone support, don’t trust it. It means the processor’s using a phone bank and the people who pick up are not the sort of merchant services professionals who can actually help you. Processors who also offer lots of free services should be avoided.
Know What Your Business Is
Many scam processors sell their scams by claiming what they offer are not High-Risk Merchant Accounts. They rely that no firm wishes to be high risk and if they assert otherwise you’re likely to believe them. Don’t be fooled. You should have the feasibility study to make an accurate guess as to whether you’re High-Risk or not. While High-Risk Merchant Accounts come with added fees and restrictions, this is because you need greater financial because of the business you run. Being High-Risk is not a slur on you or your way of running a business. Be upfront with others and yourself about what your business does.
High risk merchant accounts may seem like an unfair burden at times. However, in reality the sorts of businesses served by these accounts are just as profitable and important as others. Still, if you are labeled High-Risk remember that you are more vulnerable from several directions. Just remember these five rules and trust your own judgement, and any business can thrive no matter how High-Risk.