A High-risk merchant account is a merchant account service provided to internet merchants that have been declared "high-risk" by Visa and MasterCard. This is owing to the nature of their businesses, that have a high credit rate or a high turnover but also, an increased risk of fraud and chargebacks.
Characteristically, it's very hard for high risk and non-US businesses to obtain a merchant account. High risk merchant accounts offered by different service providers allow International Merchants to privately process their credit card transactions and have the proceeds sent to an offshore bank account. The fees are higher for offshore/high risk credit card processing.
Credit card processors are likely to reject you if your business is considered high-risk. The aim is to locate a credit card processor that gets you approved and has you up and accepting credit cards quickly and efficiently, with either a high risk merchant account or an international merchant account.
Examples of high risk merchant accounts include pharmaceuticals, telemarketing, infomercials, travel industries, online dating, replica, gaming etc. Some of these are considered more high risk than others.
High risk merchant accounts are available with international banks. A merchant has to do the following to obtain a direct account if their merchant account is considered high risk:
1. Incorporated in the bank's jurisdictions (this requirement is based on credit card operating regulations) 2. Have 6 months of existing processing history (preferable the last 6 months) 3. Chargebacks in the last 6 months must be less than 1 %. 4. Pay the required set up fees 5. Provide principal's passport, business incorporation documents - some jurisdictions require a local nominee director's passport and a utility bill of the nominee director. This is done to avoid cross border issues. 6. The merchant website has to be in compliance to Visa and MasterCard requirements
These merchant accounts can also be classified as offshore high risk merchant accounts, international merchant accounts, and high volume merchant accounts.
The other option if you do not have processing history and you do not want pay the expensive of incorporation in the bank's jurisdiction, you can always get a third party merchant account. A third party merchant account's underwriting is less stringent and is set up much faster than a direct account.
Merchant accounts are those accounts used by the people involved in doing business, be it an online store, online services and entertainment or any other business dealing with day to day transactions in form of cash, check or credit card billing.
The hullabaloo surrounding offshore merchant accounts is due to its flexibility wherein a person can sell his merchandise to someone on the other side of the planet without much fuss. The taxation rules and other international business transaction guidelines are levied in the merchant's and the buyer's respective countries.
But, as they say, ?all good things in the world come with a price tag?, the offshore merchant account providers charge astronomical sums of money for the services they cater to. The providers lay in front of the merchant, a host of charges and fees like installation fees, transaction fees, charge back fees, discount rate, and minimum monthly fees and so on. The reason behind charging such high rates is due to the high risk involved in maintaining and restricting the merchant accounts within the boundaries of legal use.
In spite of the heavy price tag, the offshore merchant accounts remain one of the most sought after by the people dealing with adult entertainment, travel, pharmacy, online casinos/gaming merchants, telemarketing merchants, tobacco and cigarettes, replica products, online auctions & debt services, E-wallet & E-cash, ISP & hosting services, online dating services etc. This is because, the merchant account provider has to deal with innumerable businesses, running into large volumes of sales, and hence, the businesses happen to be risk prone due to incidents like charge back and other fraud threats.
Another reason for the demand to acquire high risk merchant accounts is because the high risk vendors are not allowed to have a standard merchant account by almost all of the merchant account providers.
There are number of offshore as well as international merchant account providers dealing in the high risk account sector and therefore it is advised to the vendor to do a complete study of the market and chose the right agency which suits the set criteria. The criteria for selecting a good high risk merchant account provider should include the following factors.
1. Provide multiple payment options and be prepared for any adversaries.
2. Provide unreachable protection and anti fraud schemes.
3.Reasonable setup and recurring fees. Protection measures.
4.Approval time and setup speed.
5.Well-organised international high risk merchant services.
Some of the general reasons for not providing the vendor with a high risk merchant account by the merchant account provider are the following:
1. If the business is unregistered as per the law.
2. If the vendor is declared fraudulent or bankrupt by the merchant account providers.
3. If the credit history of the merchant is disappointing.
4. If the merchant runs a business that has high scope of risk in it like gaming, downloadable soft wares etc.
5. If the merchant deals with large volumes of sales and many transactions, the probability of fraud in such situations increases and the merchant is tagged "high risk".
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