What No One Knows About Accounts
Is A High Risk Merchant Account That Important For Businesses?
High risk merchant account is simply a payment processing agreement or merchant account that’s tailored to suit a business which is considered to be high risk or operating in an industry that’s been considered as such. Usually, these merchants have to pay higher fees for the merchant services which may add to their cost of business that then affects ROI and profitability.
There are many companies that specialize in working primarily with high risk merchants by offering faster payouts, lower reserve rates and/or competitive rates and all of which are created to attract companies that have troubles in locating a place to do business.
Businesses that operate in different industries will be considered high risk depending on the nature of industry they are in, the method to which they operate or even varieties of other factors. To give you a quick example, adult businesses are considered to be high risk operation much like in travel agencies, collection agencies, auto rentals, legal online and offline gambling, bail bonds and other businesses offline and online. Mainly because of the reason that working with and processing payments for these types of companies possess higher risks for financial institutions as well as banks, they’re required to sign up for high risk merchant account that implements different fee schedule compared to regular merchant accounts.
Basically, merchant accounts are a bank account but this works like a line of credit that enables an individual or a company to receive payments from debit and credit cards used by consumers. The bank that offers merchant account is referred to as “acquiring bank” and the bank that has issued the credit card of the consumer is referred as issuing bank. Another vital component of processing cycle is the gateway, which deals in transferring transaction information from consumer to the merchant.
Whether you believe it or not, the acquiring bank is offering payment processing contract or the merchant account may need to open high risk merchant account with high risk payment processor that will collect funds and route them to account at acquiring bank. In case of high risk merchant account, there are added worries regarding the integrity of funds as well as the possibility that the bank can be responsible financially in case of any problems. For this, high risk merchant accounts normally have added financial security measures in place like delayed merchant settlements to which the bank holds the funds for a bit longer time.
There are several factors that need to be considered prior to settling on a certain merchant provider whenever a merchant has applied a merchant account with payment processor, a bank or any other merchant account provider.