In 2020, credit cards were the most popular payment method in the United States, followed by debit cards. However, businesses that want to accept electronic payments need to apply for a merchant account. Before applying, it helps to determine whether you are likely to be classified as a high risk or low risk merchant.
Often, low risk merchants have a low chargeback ratio, relatively low monthly transaction volume, and strong credit history. In contrast, high risk merchants have higher chargeback ratios, operate within specific industries, and have an increased risk of fraud. However, each merchant provider has different criteria to determine which one you are.
In general, low risk merchants have access to more competitive rates and contracts because payment processors and banks don’t have to deal with as many risky transactions. Some common characteristics and indicators of a low risk business include:
Depending on your merchant code, industry, and chargeback ratio, you may be categorized as a high risk merchant by your provider and bank. Some typical signs of a high risk business include:
Although some payment processors may not be willing to work with you if they consider you a high risk business, there are some reputable options out there that provide additional security for greater peace of mind.
Read on to learn more about how to choose the best high risk merchant processor for your business at Processing Card today!
Florence Carpenter is passionate about ensuring that the process of opening merchant accounts is as straightforward as possible. She graduated from the University of Michigan with a bachelor’s degree in Marketing.
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