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High Risk Merchant Accounts
A High-risk merchant account is a merchant account service
provided to internet merchants that have been declared "high-risk" by
Visa and MasterCard. This is owing to the nature of their businesses, that have
a high credit rate or a high turnover but also, an increased risk of fraud and
chargebacks.
Characteristically, it's very hard for high risk and non-US businesses to
obtain a merchant account. High risk merchant accounts offered by different
service providers allow International Merchants to privately process their
credit card transactions and have the proceeds sent to an offshore bank
account. The fees are higher for offshore/high risk credit card processing.
Credit card processors are likely to reject you if your business is considered
high-risk. The aim is to locate a credit card processor that gets you approved
and has you up and accepting credit cards quickly and efficiently, with either
a high risk merchant account or an international merchant account.
Examples of high risk merchant accounts include pharmaceuticals, telemarketing,
infomercials, travel industries, online dating, replica, gaming etc. Some of
these are considered more high risk than others.
High risk merchant accounts are available with international
banks. A merchant has to do the following to obtain a direct account if their
merchant account is considered high risk:
1. Incorporated in the bank’s jurisdictions (this
requirement is based on credit card operating regulations)
2. Have 6 months of existing processing history (preferable
the last 6 months)
3. Chargebacks in the last 6 months must be less than 2 %.
4. Pay the required set up fees
5. Provide principal’s passport, business incorporation
documents - some jurisdictions require a local nominee director’s passport and
a utility bill of the nominee director. This is done to avoid cross border
issues.
6. The merchant website has to be in compliance to Visa and
MasterCard requirements
These merchant accounts can also be classified as offshore
high risk merchant accounts, international merchant accounts, and high volume
merchant accounts.
The other option if you do not have processing history and
you do not want pay the expensive of incorporation in the bank’s jurisdiction,
you can always get a third party merchant account. A third party merchant
account’s underwriting is less stringent and is set up much faster than a
direct account.
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