High Risk Merchant Processing

First you need to understand why you are called a High Risk merchant. Your processor or the Bank decided they can loose money by providing merchant credit card services to you. Below is a visual representation of factors that can make you High Risk.

Most of the High Risk merchant problems you can mitigate. Let’s look at them separately.

Your Industry alone can put you into High Risk category

The following industries are High Risk because of their proximity to illegal activities

  • Marijuana
  • Gambling
  • Escort Services
  • Prescription Drugs
  • Tobacco/Alcohol
  • Foreign Exchange
  • Money Services
  • Gun, Ammunition Sales
  • Nutraceuticals
  • Here is a more complete list of High Risk business types

If you are one of these get a consultant or a lawyer and ask him what NOT to do. They will explain your restrictions, which could be by geography, age or licensing.

Industry with historically high Chargebacks will also automatically qualify you for High Risk category.

  • Travel
  • Tech Support/ SEO
  • Custom Furniture Sales
  • Bankruptcy Attorneys
  • Non-profits
  • Plastic Surgeons
  • Full list of High Risk merchant types here

Businesses such as custom furniture, bankruptcy attorneys and cruises all take money up front, but if a customer changes their mind they file a chargeback. Others, like SEO and Plastic Surgeons, are High Risk because customers who aren’t satisfied with the outcome dispute the charge (no one likes a facelift gone bad!).

Hmmm. My business falls into one of these categories. What can I do?
  • Don’t advertise something you can’t prove.
  • Provide quality product/service. Positive online reviews are gold!
  • Understand and stay on top of common fraud strategies in your industry
  • Be paranoid about staying within legal boundaries.
  • Avoid law suits.
  • Pay your vendors and maintain a good credit rating.
  • Watch your Chargebacks

Know the way you do business

You also might become a High Risk merchant because of how you conduct business. Any of the following will put you into that club:

  • E-commerce/Online business
  • Average sale amount over $1,000
  • Recurring/monthly billing
  • Offshore business
  • Accepting payment up front (retainers)
  • Selling expensive and trendy items (increases fraud)
  • Delayed delivery
I conduct business this way. Now what?
  • Deliver the product on time and as agreed
  • Communicate with your customers often and confirm (delivery, satisfaction, etc.)
  • Ask for positive reviews
  • We can’t stress enough how important it is to watch your chargebacks!
  • Set up automatic fraud alerts through your processor or gateway
    • Do not mail if shipping address differs from billing address
    • Watch for international or strange IP addresses

If you found this info useful, read about how to reduce Chargebacks next.

Or compare merchant services providers and their rates.

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