High-Risk Merchant Account
When you’re a high-risk merchant, it’s essential to have a strong understanding of the risks involved in doing business with certain types of companies. The high risk merchants are more susceptible to fraud, chargebacks, and other financial issues than average businesses, so they must avoid signing up for partnerships with companies with a history of problems or questionable practices.
6 Red Flags To Avoid While Opening A High-Risk Merchant Account
These six red flags will help guide you through the process of checking your potential partner before committing:
High chargeback ratios.
A chargeback is when a customer contests the legitimacy of a charge to their card (or bank account). For example, if you’re selling electronics online, you may sell something that doesn’t work as advertised or was damaged in transit. If this happens, your customer will call their bank and request that they reverse the transaction back to them instead of paying you. Money comes out of your account and goes into theirs—whether or not it’s technically yours! Chargeback ratios are directly related to the cost of doing business with merchants who accept credit cards or debit cards as payment options because it can be costly for both businesses and their customers when there are high rates of disputed transactions happening between buyers who claim fraud and sellers who want their money back.
Processing issues are a sign that something is wrong with your business. If you have a high chargeback ratio, it’s likely due to poor customer service or product quality. If you have a long history of processing issues and complaints, there’s probably an underlying problem with how your company operates. A lack of transparency is another red flag that can indicate fraudulent activity, especially if it’s accompanied by a high chargeback ratio or negative customer reviews.
Operates from a high-risk country.
Your website may be operating from a high-risk country if you see any of the following:
- A third party hosts your website. In this situation, your website can potentially be compromised by fraudsters. Get a secure hosting plan to ensure that only approved staff members can access your site.
- You’ve received suspicious emails or phone calls claiming that your business will be shut down unless you pay up immediately. These are usually scams and should not be taken seriously! If you feel something is wrong with your account, call us before making any payments or sending any personal information over email – we’ll help clear things up for you immediately!
A poorly constructed website.
A poorly designed website can reflect a lack of attention to detail, and that’s not what you want from your high-risk merchant account provider. Look for a company with a clean design, clear navigation, and professional-looking content. If their site looks like it was thrown together by a teenager in the basement of their parent’s home, you may have found yourself an unqualified provider.
No refund policy or a poorly worded one.
The refund policy should be clearly stated on your website and any other important information you want to make sure customers are aware of. For example, if you have a 90-day return policy, it’s good to mention that in this section so that people know they can return their purchase within the specified period.
It’s also important to remember that specific laws dictate how long you can keep products before they become unsaleable. If someone returns something that has passed its expiration date or is past its sell-by date, the merchant will incur an additional cost, which the sale price may not cover. Therefore you must ensure your refund policy includes how long after a purchase a customer has before items become unsalable and what happens when items become unusable after purchase.
History of bankruptcies.
Bankruptcy is a red flag that can be difficult to ignore. If a business has filed for bankruptcy, they likely have some adverse history with its finances. That said, not all businesses with bad credit are out to scam merchants or run away with funds. When evaluating your potential high-risk merchant account partner, check an established business’s track record by looking at past bankruptcies using resources.
You’ll want to look out for signs that may indicate your future partner is struggling financially: late payments on invoices; legal disputes over unpaid debts; complaints from customers about slow response times or lack of service after purchase; poor reviews online—these are all things you should pay attention to as well if you’re considering opening up banking services with them.
Summing It Up!
We hope this guide has helped you better understand high-risk merchant accounts and some of the potential red flags you might encounter. If any of these red flags sound familiar, it’s time to start looking elsewhere for your business needs. It’s also important to note that it’s not just high-risk merchants who have problems with banking. Even if you don’t fit the traditional definition of a high-risk merchant, there are still ways for banks to discriminate against you and make it difficult for your business.