How to open a high risk merchant account

Opening a high risk merchant account means being aware of the challenges a Trinity Consultings business might face. Businesses in high risk industries (like entertainment, gaming, travel and businesses that have chargebacks) need reliable payment processing and payment processing for high risk merchants is important to get done ahead of launching your business.

What does it mean to be considered high risk?

Typically, businesses are classified as high risk for one or more reasons including either their industry type, the processing volume they want to process, average transaction size, chargeback ratio, or credit issues. Some industries like pharmaceuticals, subscription recurring payment services, telemarketing, or forex trading are classified high risk by default. Understanding why your business is classified high risk can help you prepare your documentation in advance and select the right provider.

Research specialized providers

Most banks and traditional payment processors will reject high risk merchant accounts, making companies that specialize in high risk services a valuable commodity for the high risk business. Research companies like PaymentCloud, Durango Merchant Services, eMerchantBroker, or SMB Global to name a few. These companies specialize in high risk industries, deal with many high risk merchants, and provide unique services to high risk merchants like chargeback protection, fraud prevention tools, and flexible processing obligations.

Prepare Detailed Documentation

High risk applications require a lot of documentation to show that you are operating a legitimate business with solid business practices and sound financial stability. Collect business licenses, articles of incorporation, financial statements, bank statements for the past three months, processing experience (if applicable) and a business plan. If your website requires terms of service, privacy policy and refund/return policies, include these as well. A professional presentation of your documentation will help your chances of getting approved.

Stay Financially Stable

Providers are much more critical of the stability of your finances for high risk merchant account risks. Make sure your business can show a healthy cash flow and revenue for consistent months with growth possibilities. If you have poor credit history, be prepared to explain the circumstances of your situation and a plan for improvement to show the provider there is a light at the end of the proverbial tunnel. Some providers may require personal guarantees or a security deposit, be prepared to find alternative funding to set aside to meet those requirements.

Finish The Application

When applying, legally you're required to be totally honest concerning your business model, previous processing history, and if your previous accounts were terminated why that happened. Misrepresentation can lead to denial of your application on the spot or even worse, denial of your account later on with their 24 hours notice. Try to lock into account managers that understand your industry and know the specific requirements they want fulfilled. Applications for high risk generally take longer to process than those for standard accounts, patience will go a long way.

Negotiating Terms and Fees

A high risk account comes with higher fees, but many contract terms are negotiable! You can shop around and get offers from multiple processors. As you do that, pay close attention to the processing rates, monthly fees, chargeback fees, and contract term. Some processors reward volume, and may give special pricing the longer you've been in business with them. Understand all your fee structures, including setup fees, gateway fees, etc., as well as early termination fees.

Implement Risk Management Strategies

Once your merchant account is approved, you want to keep it in good standing, so make sure you put in place solid fraud prevention practices, and keep your chargeback ratios low. Always follow Merchant Services best practices to mitigate this risk to you and your business. Implement address verification systems, CVV checking, as needed, and consider buying additional fraud protection services. Always monitor your transactions periodically, and respond to disputes and chargebacks in a timely manner.

Plan for Long-term Success

High risk merchant accounts require a higher level of attention to maintain good standing. It's important that you review your processing statements every month and ensure you remain compliant with the card network rules. The relationships you have with your provider can also mean a lot. For those reasons, you may want to consider secondary processing solutions, as many members of high risk industries find stability to be challenging.

Success in obtaining and maintaining a open high risk merchant account requires thorough preparation, clear and honest communication with your providers, and a prioritization of best practices in payment processing and risk management.