Your business may be considered “high-risk,” in which case, you will not be approved for a regular merchant account with a financial institution. High-risk merchant accounts are offered for clients who may have one or more of the following characteristics:

1. Businesses vulnerable to frequent chargebacks

A high volume of chargebacks, money refunded back to the customer without your authorization, is one of the highest problems faced by merchants. A chargeback can occur for several reasons like identity theft or a credit payment claimed not to have been authorized. These forced refunds cause a loss of profit and product, and it is not guaranteed that the customer will pay what he or she owes after a chargeback is processed.

Accepting e-check payments makes it more difficult for customers to initiate a chargeback while they still can, and inconvenient to dispute charges. Merchants also don’t have to update bank account information as often as they do credit and debit card information.

2. Blacklisted companies

Some merchant accounts are terminated because of chargebacks, meaning they will not be accepted by most merchant account providers.

3. Industries with poor reputations

Debt collection agencies, for example, have a reputation for being annoying and overbearing. This affects consumers’ willingness to pay, especially if a collector is attempting to obtain money from services rendered years ago. This industry, in particular, is risky because there are many agencies that do not operate reputable and honestly, tarnishing the industry’s reputation as a whole, and preventing legitimate collection agencies from being approved for merchant accounts.

International merchant accounts are frequently considered to be “high-risk” as well because of the lack of transparency commonly seen with offshore accounts. International accounts can be legitimate and beneficial businesses, but many international merchants have earned a reputation for avoiding reasonable and honest practices.

Collections agencies and other industries are known for a poor reputation must follow all laws and guidelines associated with their business, and are more likely to be approved for a high-risk merchant account that can protect them from chargebacks and fraudulent payments. Such payments are made to deter bill collectors from contacting consumers, temporarily at least, and without services like Same Day ACH or verification services, these kinds of payments can detriment a business’ cash flow consistency. 

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