What is a High Risk Merchant?

Malcolm Tatum
Malcolm Tatum

High risk merchants are companies engaged in business pursuits that carry a higher degree of risk to credit card companies, banks, and other entities that provide merchant account services. There are several factors that go into determining if a given concern qualifies as a high risk, including the type of business conducted, the location of the business, and the potential for credit card abuse at those locations. A high risk merchant can usually obtain merchant account services, but will pay additional fees for the ability to process credit and debit cards.

A high risk merchant will often be charged a higher fee when a consumer uses a credit or debit card to pay.
A high risk merchant will often be charged a higher fee when a consumer uses a credit or debit card to pay.

One of the reasons why a particular business would be considered a high risk merchant account has to do with the type of products and services offered for sale. Different merchant services categorize a number of companies as a high risk, including some that many consumers would not necessarily see aa being any more of a risk than others. One example of a high risk merchant would be a business that sells adult-oriented products, online or offline. Check cashing services, escort services, and multi-level marketing businesses are also considered higher risks for payment processors.

The location of the business can also make a difference when it comes to deciding if a particular customer represents an increased risk to the credit card processor. Businesses that are home-based are generally considered to be a greater risk, even when those businesses have a solid financial base. Any type of business that is located in an area where the crime rate is higher is very likely to be considered a high risk merchant. Both these scenarios are thought to have an increased potential for credit card abuse as well as the use of counterfeit cards.

It is also possible to be considered a high risk merchant when the company has a history of abuse related to credit and debit cards. For example, if it is discovered that the business has been allowing customers to obtain cash on credit cards rather than purchasing goods or services, there is a good chance that card processing services will either be revoked, or a substantial increase in processing fees is put into place. This action is likely to take place, since most credit card issuers charge an additional fee for customers to obtain cash from credit cards.

The nature and circumstances of some businesses make it very difficult to obtain merchant services. Over the years, a number of services that cater specifically to companies that are considered a higher risk have come into being. Services of this type usually offer a full range of support to the high risk merchant, providing online and offline solutions for processing debit and credit cards.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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