High risk merchant accounts are required for merchants that typically incur a higher rate of charge backs of credit card fraud. This is mostly defined by banks or third party merchant account providers based on the industry the merchant is in, as well as individual factors, such as the history of the business itself. For an online business, there is already a higher risk involved as the card holder and the card are not physically present at the time of the transaction.
High Risk industries include:
- Multi-Level Marketing (MLM)
- Cellular Phones
- Replica Products
Due to the high risk involved, banks will often decline applications from merchants within high risk industries. Fortunately, a number of alternative merchant account providers are able to offer high risk merchant accounts. In order to offset the higher risk associated with the merchant, the provider will often charge a higher transaction rate or add additional fees.
Rates for a standard account are usually around the 2% – 5% mark, with a flat transaction fee of $0.20 to $0.50. For a high risk merchant account, rates range from 5% – 10% with a flat transaction fee of $0.20 – $0.75. Some providers offer rates from 4 – 5% for high risk merchants as they are designed specifically to accommodate high risk merchants.