What Are High Risk Business and High Risk Products?
There are various reasons why a processor might label a merchant as ‘high risk.’ Some characteristics that identify high risk businesses are superficial factors based on the business’s industry or clientele, while others are directly related to the merchant’s business practices.
High risk businesses will be unable to secure a standard account with most acquirers. They will instead have to go with a high risk merchant account, which typically means that the business will incur various restrictions and very high processing fees that will adversely affect the bottom line.
Merchants who choose to sell things that are considered to be high risk products will have a hard time avoiding any negative repercussions doled out by acquirers and processors. However, merchants who offer relatively ‘safe’ products and services can avoid the label of high risk—but only if chargebacks are managed successfully.
What is a High Risk Business?
There are various factors which might put a business into the “high risk” category:
You’ve been branded as a terminated merchant (TMF)—meaning you’ve lost your previous merchant processor account because of excessive chargebacks.
You are a new business with very little credit card processing history.
You are in an industry with high chargeback ratios.
You sell products or services that usually result in high dollar transactions.
You provide subscription based products or services.
You are an international merchant or do business in countries with a high chargeback risk (basically anywhere outside Canada, the US, Australia, European Union, Japan, South Korea or Singapore).
You are a multi-currency business.
You have a bad credit history.
