What’s a High Risk Merchant Account?

Certain companies are considered a high risk when it comes to granting them merchant accounts. While there are a variety of reasons why a company may be labeled high risk, the biggest factor when coming to this determination is the product that the company is selling.

What Products Are Considered High Risk?

Products that may be considered a public health hazard such as cigarettes or health and beauty products that have not been tested or certified by the FDA could be labeled as high risk products. Digital products may also be labeled a high risk because they can be altered, corrupted or used to spread viruses to an entire network of computers or several networks of computers with ease.

The Credit History of the Business Owner Could Impact Merchant Account Status

If the business owner has a poor credit history or the company that he or she owns has a poor credit history, any account provided to that company could be labeled as a high risk account. Typically, a merchant account provider will do a background check on both the owner and the company to ensure that it makes consistent income and is not a risk to commit fraud. A business that is granted a high risk merchant account can expect to pay higher rates and other transaction fees than companies that are not considered a high risk.

Why Does the Merchant Account Provider Need to Protect Itself?

A merchant account provider is unlikely to be held responsible for what a company sells. Unless a security breach or other damages can be attributed to an unsecure payment server or to something else that the merchant account provider should have guarded against, the merchant is going to be held liable. However, the merchant account provider could lose a lot of money if it has to return money to customers who demand refunds for fault, dangerous or ineffective products.

If your company wants to provide customers with the ability to pay by credit card, it will need a merchant account first. Talking with a electronic cigarette merchant account provider is the first step toward accepting credit cards and potentially boosting sales.