A high risk merchant account is a type of account for businesses designed to help them function. A business that is deemed to be one of the high-risk merchants in the UK, needs one of these types of accounts as the banks consider them to be high-risk to function in an effective manner. It might be difficult for a bank to allow them to accept credit cards and transactions, and therefore they need to be given a high-risk merchant account.
High-risk merchant accounts could be awarded for any number of reasons, in many different industries. To be successful with an application for a high-risk merchant account in the UK there are a certain set of guidelines and processes for a business to pass through. We’ll take a look at all of this in our guide to high-risk merchant services in the UK in 2022.
In most cases, there are two main reasons why your business might be deemed to be high risk by a financial institution. The first is that your business (or the owners/directors) have a poor credit history and is deemed a risk, or the business is within an industry or sector that is deemed to be high risk.
Whatever the reasons behind why you are given a high-risk merchant account, you will be required to pay higher transaction fees and higher monthly fees to access the account, than you would be required to pay as a customer deemed to be low risk. If you compare the various merchant services on the market in the UK today, you’ll find the right account services for you with fees that are cost-effective, even if they are higher than for low to medium-risk businesses.
What industries are high risk?
There are some industries more than others that are considered to be high risk by banks. This does not mean that a business working within these industries are unprofitable, it just means that the bank feels these industries are more likely to have refunds, chargebacks, and experience fraud. Some of the industries include the dating industry, adult content, products and services, casinos, online gambling, e-cigarettes and vaping, the travel industry, payday loans, alcohol products, investment schemes, digital downloads, health supplements, nightclubs, credit repair, and many more.
Do I need a high-risk merchant account for personal bad credit?
If your business is within an industry or sector that is not deemed to be high-risk, but your personal credit history is poor, you might be wondering where this leaves you in terms of whether or not you need a high-risk merchant account. In these instances, it is most likely that you will need to pay higher fees to begin with, but if you keep up with your bill paying, pay down your credit and improve it over time, you won’t be considered high risk eventually. This can take a bit of time though.
What is the difference between a high-risk merchant account and a standard account?
The biggest difference between high-risk merchant services and a standard account is the fees and settlement period. High-risk accounts have settlement periods that are around a week as opposed to 3 days. The transaction fees can be as high as 10% for certain industry and international transactions, as opposed to 1% for a standard merchant account. Monthly and annual fees are much higher too – think about at least £50+ a month, whilst there is a higher reserve expected (at least 15% of transaction money to be left in the account to handle potential fraud and chargebacks).
What to look for in a high-risk merchant account in the UK
There are a few things to look out for when it comes to choosing a high-risk merchant account. Look at whether the company has worked with other companies in your industry. This will help them to identify typical transactions and be better at detecting fraud. You also want to ensure there is a customer service line available to help you immediately should you need assistance. Also, look at the fee structure, as some merchant services offer low monthly fees but a high discount rate, whilst others offer low transaction rates but higher monthly fees. You need to choose what works best for your business.
There are plenty of different high-risk merchant accounts and services on the market in the UK today. Finding the right type of account that works for your business is vital to ensure that you can fully function and be in a position to accept credit card payments and financial transactions that keep your company cashflow healthy and the business moving forward. Even if your business has a poor credit file attached to it, or you work within an industry that is inherently high risk, such as online gambling, casinos, payday loans, or the travel industry, you should be able to access a merchant account. Just be prepared to pay higher fees and monthly amounts to access and utilise those services.