If you run a business that is considered to be high risk and you want to accept credit cards you are probably having trouble getting them accepted from a conventional bank. Most banks don’t want to work with high risk merchants and this can complicate your business since most people prefer to pay for their goods and services with cash. If you need to accept credit cards you are going to want to get a high risk merchant account so you can accept credit cards. Read on to learn more about high risk merchant accounts and how to get them.
What Makes A Business High Risk
A business can be considered high risk for many reasons. You might be running a risky business like an adult or cannabis business. You might also be considered high risk if your industry has a history of a large volume of charge backs. The bank basically considers you to be too much trouble and they don’t want to spend a lot of resources managing your account. Any situation that poses a risk to the bank is going to be considered high risk and you are very likely to get turned down for an account.
How To Open A High Risk Merchant Account
If your business is in a high risk category, you will need to open a high risk account from High Risk Solutions. There are a variety of providers who offer these services and you can find them online. You are going to want to spend some time researching the different banks and looking for the lowest fees since you are going to end up paying more in fees and rates when you are a high risk merchant. Be prepared to pay the extra processing charges and you want to make sure that you know what they are so there aren’t any surprises.
Make sure that you pay attention to the length of your contract as well. Many high risk merchant account providers will not allow you to have a month to month service. You often have to sign a contract for three to five years and many of the contracts have automatic renewal clauses so you could be stuck with your provider for a long time if you are not careful. You need to know what is in the contract and what all the fees are going to be before you sign up.
The contract is going to have an early termination fee and there might even be a liquidated damages clause that will cost you even more money. It is important to know all about the different rates and penalties and you can save money by spending a lot of time comparing rates so you get the best rate. The bank is taking more of a risk working with you so have to pay more money to reflect this risk.
Keep An Eye On The Rolling Reserve
The rolling reserve is another issue you have to deal with when you are a high risk merchant. A rolling reserve takes some of the money from your sales and sets it aside for charge backs or other issues. The reserve is going to be highest when you first start working with the merchant and it should start coming down the longer you work with the merchant. If your account doesn’t have a lot of problems, the reserve will go away and you won’t have to worry about this situation anymore.
You can end up with some serious cash flow issues if you don’t plan for the reserve and if your profit margin is too tight you could even end up going out of business so you want to make sure you know how much is going to be taken out of each transaction so you can plan for the extra fees.
Avoid Predatory Providers
There are many predatory merchant account providers who will try to take advantage of the situation so they can charge you more money. These providers are going to charge fees that are higher than industry standards and they prey on businesses who are having problems finding the merchant providers that they are looking for. If you are desperate to get an account you could end up paying a lot more money than you need to and you could end up getting terrible service as well. You need to be very careful when you are signing up for a merchant account since it can be hard to tell who the predators are.
How To Tell If The Merchant Provider Is Predatory
It can be very difficult to tell who is worth working with and who is predatory. You are going to have to do some research to find out who you want to work with so you end up with the best deal. Make sure to check the website of the merchant provider. If the layout looks cheap or there are a lot of words that are spelled wrong, choose another service.
You can also do research on the merchant provider online. If you see a lot of bad reviews and complaints you are going to want to work with a different service. It is also very important to read the contract carefully. You never know what you are going to find in the fine print and reading the contract carefully could save you a lot of money in fees and charges. A shady company is going to bury a lot of different fees in their contract and hope that you don’t read it. You will only find out what the service is going to cost you when it is too late and you can’t get out of the contract without paying even more fees.
High risk merchant accounts are going to cost you more money no matter what, but if you do plenty of research you can find ways to keep the costs down. Look for providers that are going to be fair and offer reasonable fees. The best providers offer the lowest rates.