If you run a business such as an escort agency, massage parlor or selling adult toys, traditional merchant account providers won’t touch you with a ten foot pole. The problem with these businesses, and other similar ones, is that they are too high risk i.e. the chances of fraudulent chargebacks are very high. If you have a standard merchant account, it will be blocked if there are too many complaints from buyers. High Risk Merchant Account providers process these claims differently. As a result, they are popular amongst companies that run such businesses. However, peers are going to do your head in by telling you all the downsides there are to such accounts. We clear the matter for once and for all by first listing the disadvantages and then telling you why they don’t matter.

Difficult to get accepted

“Unfortunately, many High Risk Merchant Account never get approved.” – lawposter.thcmn.com

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High Risk Merchant Accounts are more difficult to obtain than standard account. The very fact that you are running a high risk business requires you to provide more documentation and assurance than normal businesses. Even after that, you won’t always get accepted.

Take into account the minimum value of business that most account providers will expect you to do, and it becomes even more difficult. Some might not give you an account unless you make transactions to the tone of as much as $50,000 a month. That’s a high number.

Besides, new upstarts are not granted accounts easily either. Most account providers are vary of new upstarts and will flatly refuse them an account. This makes life difficult for any enterprising individual who wants to set up a risky internet business.

High fees

“…you might have to pay a start up fee that is usually much higher than a regular account would charge. Of course, you will also be charged a higher credit card processing rate…” – WebMarkSolutions.com

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Then there are the high fees associated with High Risk Merchant Accounts. Normally you can expect fees to be about two to three times higher for high risk account compared to standard accounts. These fees can be a major setback if your profit margins are already low.

Holdbacks and Chargebacks

“If you read the fine print in your merchant account agreement, you’ll likely see a provision allowing your provider to withhold cash from your receipts, even without telling you.” – blogs.business.com/whatworks

Even after paying the ridiculous fees, you don’t get your money immediately. Many account providers are known to apply a holdback on your payment so that you have to wait for as long as one month to actually be able to use your money. Oh, and even after that you won’t necessarily get all your money. They might issue a minimum rollover of about 5 to 10%, so that you have to maintain a certain minimum balance in your account.

Then there is the issue of chargebacks. Even with a high risk account, there is a certain level of chargebacks after which the account providers start disliking you! More than a certain level of chargebacks (usually in the 5% range) and your account is automatically closed.

It’s not all downhill

There you have it, all the disadvantages associated with High Risk Merchant accounts. But coming to think of it, despite all these disadvantages, there’s no beating High Risk Merchant Accounts when it comes to security for your growing business. For businesses that involve gambling (legally), escort services, dating services or other activities listed here, high risk accounts are the only option unless you want to see your account shut down every other month. These accounts offer peace of mind and the ability to take risks in your business without worry of complaints from your account provider. High Risk Merchant Accounts, for that reason, are indispensible for enterprising individuals or ambitious businessmen. So if you have friends telling you to stay away from high risk accounts, those ‘friends’, or at least their advice, are the ones you need to really stay away from, since they clearly have no idea about the utility of such accounts.