A high risk credit card merchant is a label which applies to certain types of businesses. A business is classified as a high risk credit card merchant because there is a statistically greater likelihood of chargebacks and fraudulent transactions for particular types of businesses.
A company is considered a high risk credit card merchant if the type of business is included in certain industry classifications. Classification as a high risk credit card merchant has less to do with the specifics of an individual business than with general payment processing trends within particular industries.
A specific company may have no history of chargebacks or fraudulent transactions. Yet, the company is still categorized as a high risk credit card merchant. The acquiring banks group together all companies that operate within an industry when categorizing a high risk credit card merchant rather than applying the high risk credit card merchant classification to a specific company.
Once a business knows it is classified in a risk credit card merchant category, it must find an acquiring bank that accepts its business type. Underwriting criteria for account acceptance varies by bank. Some banks accept certain types of high risk credit card merchant accounts but not other types.
An important initial question is whether or not the bank with which you are applying has other high risk credit card merchant accounts in the same type of business as you are. Once you have confirmed that the bank accepts high risk credit card accounts for your type of business, you can move ahead with the application process.
Rates for high risk credit card merchant accounts are based on the underwriting for your specific business. Most high risk credit card merchant accounts have low rates and favorable terms.
Classification in a high risk credit card merchant account category is only a small factor in the underwriting process. The real factor in determining rates is the specific information about the company which is submitted with the application.
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