Understanding the Rates and Fees for A High-Risk Merchant Account

Buying and selling the world of commerce has been greatly facilitated with the advent of the electronic credit card and businesses that can’t process transactions with this payment method stand to lose a good portion of their business opportunities.

No one understands this better than the community of “high-risk” businesses banished being a prohibitive barricade built by financial institutions looking to protect their interests. The only opportunity of reaching their credit card toting clients is with a High-Risk Merchant account.

As anyone familiar with the search for a suitable high-risk merchant could tell you, the choices are not as pretty as they should be.

High-risk merchant accounts are needed by a great variety of businesses due to the unpredictable nature of many online business endeavors. Those industries and that sell products of questionable legality and businesses with a high rate of fraud and chargebacks will be labeled high-risk. Businesses that deal with reservations made in advance like tourist attractions and activities or travel agencies may also be considered high risk. 

Online smoke shops that sell vapes, bongs and glass pipes also find themselves unable to work with traditional providers, despite the cultural/political movement toward legalization and acceptance.

But, there is a good chance that you can find a suitable high-risk merchant account provider that give your specific online business the lucky break it needs to begin doing business with a greater number of clients. A high-risk provider will work with your business to provide financial aid when making transactions that can be considered High Risk.

The first step to finding the best provider for your needs will be with a better understanding of the risks these financial solutions take and why the fees and rates are so high compared to regular rates.  The following article will provide an overview of the rates and fees applied to high-risk merchant accounts and why they are in place.

Fees and Rates for High-Risk Businesses

If you are still reading, we will assume that your business is high-risk and you have already made peace with the fact that higher rates and fees will be the only way to maximize your profits by allowing you to receive credit card payments from https://highrisk.solutions

High-Risk Merchant Account Contracts

Your high-risk account will cost more in account fees and the charges to process each transaction. But the real demons will be sitting between the lines in the mandatory contracts you must sign for this account type. Longer contracts can become very unprofitable to the point that the incomes barely cover the costs of the account.

Some financial institutions allow businesses that have not been found high-risk to negotiate the length and terms of their contracts. The traditional approach was centered around three-year contracts that reduced the flexibility of a merchant to handle their business as they choose. Merchants have been quite vocal in their dissatisfaction with this financial solution and now shorter month to month terms are being provided by some financial institutions.

 

But, none of this will apply to your high-risk business that may face the brunt of a one-sided contract that gives the high-risk merchant very little say what happens. Your contract could run as long as five years and include a renewal clause to continue beyond this, unless properly closed down. You will need predict the financial viability of this option. If you search high and low, you may find some providers that will offer shorter contract terms, but this should not be the deciding factor when selecting a suitable provider.

If you hope to close the account before the date on the contract, you may be faced with an early termination fee the details of which will be included in the contract. Be sure to read the fine print because there may also be a liquidation of damages charge that will further elevate the costs of your contract termination. Bottom line be sure you know exactly what you are getting into.

High-Risk Merchant Account Monthly or Annual Fees

As the global financial processing industry moves slowly toward lower charges for annual and monthly accounts, none of this benevolence will fall on the high-risk merchant community. As a matter of fact, monthly fees will be considerably higher than you will find for the regular non-high-risk account. This is where the risks taken by your account provider in allowing you to process credit transactions will be offset.

High Risk Merchant Processing Costs

Elevated processing costs for a high-risk merchant account are also an important part of the final tally. While you may be lucky enough to find a interchange-plus pricing plan, most likely you will be facing a variation of a more expensive multi-level pricing plan.

But, either way you will still be facing increased costs per transaction and an elevated percentage markup as well. This can easily amount to twice the costs you would find for an account that is not high-risk. But, if you take the time to search for the right provider you may find some that offer lower rates than others.

The Rolling Reserve

The rolling reserve is another expense that many financial institutions offer high-risk and non-high-risk merchants. Non-high-risk businesses that see this charge will typically be starting up and have no credit history. This cash is collected from your profits and held against the day your account sees unexpected costs or if your business should suddenly cease to function.

The good news is that a rolling reserve will decrease in time and a successful business will no longer be given this expense. The bad news is that they can put a serious clamp on initial cash-flow and have caused many fledgling merchants to seek gainful employment in another line of work. This happens primarily when these charges are not managed carefully.

Having a better view of what you will expect from the financial community a a member of the high-risk merchant community will allow you to choose the most profitable route through the accounts available to you. Never underestimate the importance of combing through the fine print when presented with a contract. The clues that will indicate the provider as the predatory sort will be included in this document.