Merchant Accounts : Reviews and Expectations
The primary costs to a merchant of merchant accounts are discount rate and transactions fees. The merchant account provider has a lot of latitude in the pricing structure.
Three tier pricing of Merchant Accounts is one of the most common pricing schemes. Using 3 tiers pricing, the merchant account provider groups the transactions into 3 groups (tiers) and assigns a rate to each tier. The three tiers are qualified, mid-qualified and non-qualified rates.
A qualified rate is the lowest tier. It is what a merchant is charged when processing a consumer credit card in a way that has been defined as standard by the merchant account provider. The qualified rates is what is usually quoted by merchant account salespeople. A mid-qualified rate is what the merchant is charged if processing a transaction outside of standard parameters. A mid-qualified rate may apply to rewards or corporate cards, which can comprise up to 40% of the cards used for purchases. The Merchant Accounts, of course, has no control over what card a consumer uses.
In layman's terms, a high risk merchant account is a type of payment processing method that has been specially designed for business enterprises that are regarded as high risk by banks. Examples include software venders, cosmetic surgeons and investment brokers amongst others. As such, these businesses have to pay more for merchant services compared to other businesses using similar services.
The flip side of a high risk merchant account is that it functions increases the operating costs of a business thus reducing their bottom line. Having seen this as an untapped market, there are companies that have dedicated their services to working hand in hand with risky merchants so as to provide them with inexpensive rates. This has enabled a number of businesses that once found the market unfavorable due to the high fees charged by banks to find a level playing field. There are hundreds of businesses that are today labeled as risky business as a result of the work they are involved in.
Payments made to high risk merchant accounts are regarded to bear an enhanced possibility of fraud. For instance, a customer could be utilizing a stolen credit or debit card to buy goods and services. This in turn raises the risks borne by the bank or payment processor. Moreover, online businesses, i.e. e-commerce are also categorized as high risk businesses as they actually do not see the credit card. All orders and payments and made and received online which can raise chances of fraudulent activities considerably.
Merchant Accounts : Reviews and What to look for in a Merchant Account ?
High-risk merchants such as telemarketers, Internet/e-commerce businesses, merchants in the travel and cruise industries, businesses that conduct Internet auctions, and businesses offering membership clubs may face difficulty opening a merchant account.
Just because you have a high-risk business it does not necessitate the fact that you cannot open any merchant account, you would be required to open a high-risk account. The banks and independent organizations that provide merchant account services will evaluate your case on the basis of certain information such as how long you've been in business, your credit history, and any previous merchant accounts you've held.
The providers would also check on information such as default payments and charge backs on your previous merchant account. If there are too many of these then it could create a negative impact on opening a future account.
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