A payment processor may stick you with a high-risk merchant account if they consider your business prone to fraud and chargebacks. Payment processors such as https://paymentcloudinc.com/ will determine if your business is high risk based on your history, type of business, and the business location.
If you are given a high-risk merchant account, the charges are usually high to maintain the account. This article discusses the factors that may make your business be considered high risk by payment processors.
Type of business
The type of business you run may make you a more high-risk business than others. Some businesses are judged by the products they sell and the nature of their business.
For example, dating websites, telemarketers, e casinos, online auctions, weapon vendors, life coaches, fantasy sports websites, etc., are all considered high risk.
If your business has a history of chargebacks
If your business has had a history of many chargebacks in the past, it may be considered high risk.
Whether the chargebacks were mistakenly placed by the payment processing or maybe you'd shipped a batch of wrong products or any other reasons, they will still identify your business as high risk.
If you have a poor personal credit score
It doesn't seem fair that they consider your personal credit score to determine your business payment credibility, but they do. Payment processors assume that you are not the best at managing your finances or are more susceptible to fraud.
The best course you can take to ensure you don’t get such issues in the future with your business is to take care of your personal credit score.
You can do this by paying off old debts, reducing your available credit ratio, or working with a personal finance expert to get your personal credit back on track to ensure you are removed from the list of businesses considered high risk.
How long you have been operating your business
The number of years you have been in business will impact the type of merchant account your payment processor will give you.
If you opened your business recently, you would need to prove yourself more to your payment processor. They are usually wary about your experience in the industry and payment processing.
Merchant account history
If you have a bad history with a previous merchant, that will definitely place you under a high-risk business. Ensure that you manage your merchant account wisely now to maintain positive reviews amongst merchant account service providers.
Avoid signing up for an account that provides more services than what your business needs. Ensure that you stay updated on all requirements of the payment processor you are currently working with.
Let's say your business is selling products or services to the united states, but your location is outside the US. Payment processors will consider your business a high-risk one because of the higher likelihood of fraud.
And it’s even worse if you are selling expensive services or products. The higher the purchase cost, the higher the risk of fraud.