Credit card processing firms look at a couple of things to determine what risk level you and your business represent for merchant accounts. Mainly, they consider whether you are operating virtually or in the real world, what your financial history is and what type of business you have.
Online or Terrestrial
The riskiness of your business to credit card processing groups depends on how (and where) you operate. Are you conducting your business mainly online? Do you have actual places of business with storefronts and office spaces? Do you work from home?
The risk of processing credit card payments goes up with e-commerce businesses due to the amount of card not present transactions. Faceless customers mean greater risk of card fraud. Virtual business comes and goes more quickly without a trace. Companies that disappear tend to default on merchant accounts associated with it.
Working out of your house drives your calculated risk level up for many the same reasons.
Your Financial History
Personal and business credit history go into determining a level of risk when it comes to card processing. Bankruptcy and failure to pay off credit cards naturally increase your risk level. With sole proprietorships, personal finances take on even greater weight.
Sales history and average sale value also play into risk determination. High volume sales of expensive items increases your risk because card fraud, embezzlement and other forms of fiscal corruption and conspiracy occur more with business with significant revenue streams.
Popular online businesses: dating services, auction sites, casinos, adult entertainment, discount sales; are considered the high risk merchant accounts. So are card not present tobacco sites.
Online businesses selling weapons of any kind: firearms, knives, ammunition or parts of weapons like magazines pose a higher merchant account risk. Adult businesses, companion or escort services, telephone conversations, bookstores, dating services, paraphernalia or toys, are in the high-risk category, too.
Membership organizations, businesses relying on subscription payments and multi-level marketing also come in for special scrutiny. Even online stores from major platforms like Amazon, Yahoo, Google or eBay can be considered high risk.
What To Do If You’re A High Risk Business
Remember, the high risk status has simply been triggered by a risk-level formula applied to accounts across the board. Businesses in high risk categories are evaluated on a case-by-case basis. Your risk status can be relieved when you prove you have staying power.
Some providers of card processing services are more risk averse than others. You may need to find a merchant services provider willing to work with your type of business type.
Humboldt Merchant Services specializes in credit card processing for hard-to-place and high risk merchant accounts with a focus on card not present and e-commerce merchants.