It’s a reality of doing business today that all merchants need the ability to process credit card payments; the majority of consumers in all industries have now gone “paperless”, making a cash-only business seem old-fashioned, highly suspect, or insecure. Most consumers rely on the assurances provided by digital payment processing heavily when it comes to ordering goods online in particular; unlike cash, digital payments will not get lost in the mail or stolen, and there are usually customer protections in effect with them, such as refund policies for non-delivered goods.
In order to process credit card payments, businesses need to set up what is known as a “merchant account”, either at the bank or through a merchant services provider, such as a credit union. For many businesses, this is no big deal, so long as they have a decent credit history and a physical storefront from which they do business. These businesses are called “low risk” businesses and qualify for what is known as a “low-risk merchant account” (subject to the best terms and rates available) because the merchant service providers and banks feel that these businesses, which are obviously based on relatively traditional business models, are trustworthy and reliable. Usually, as these types of businesses have a physical location, they are turning to local banks, something the banks favor as this gives the bank more control over how that business operates (and assets to seize).
This system is, of course, heavily biased, and lumps all online businesses—regardless of their track record with customers and credit agencies—into a higher category of risk. The banks also discriminate against certain industries on “moral” grounds or complicated legal grounds (such as in the medical marijuana industry, where MMJ is considered fully legal in some states while remaining illegal at the federal level) even if the businesses applying for merchant accounts with them do in fact have a physical location.
Many new business owners do not even understand the complicated and archaic processes that result in them being classified as “high risk” when they have excellent credit scores, solid revenues, and no marks against them, and one really cannot blame them for their befuddlement. Usually this has to do with what type of industry the business is in, as mentioned above, but sometimes banks even decide to discriminate against businesses that simply require extensive travelling or which seem too profitable!
Which Kinds of Businesses are Discriminated Against for Being “High Risk” Even When They Have Great Records?
Some business probably expect to be classified as “high risk”, such as those selling weapons, pornographic material (or escort services or adult chat lines—basically anything “R rated” in nature), currency trading, Kratom, or legal marijuana (CBD oils). Some business, however, experience heavy discrimination (to the level where they cannot get a merchant account with any local bank or credit union) when they are not selling anything obviously morally dubious. E-cigarette businesses, for example, tend to find it nearly impossible to secure merchant accounts even though they are selling a healthier alternative to smoking, one which helps many smokers to quit—hardly a morally reprehensible item. Even completely “harmless” businesses like travel agencies and antiques and collectibles dealers tend to be so heavily penalized they cannot get merchant accounts through local banks and credit unions.
What Should a Business Which Qualifies for Only High Risk Merchant Services Do?
Obviously, one cannot simply forgo having credit card payment processing abilities. It may seem tempting to do so when a business is confronted with high rates when seeking high risk payment processing providers, or finds shady-looking providers, but if you own a business which has recently been unexpectedly deemed too “high risk” for a merchant account, don’t panic—There are reputable third party providers out there, you just have to know where to find them. Look for fair rates for high risk credit card processing, review your contract with your merchant services provider carefully, and choose a reputable third party provider like Global Merchant Solutions LLC, which deals with legitimate offshore firms willing to house “high risk” businesses.
Some high-risk merchant service providers are predatory and simply trying to squeeze high rates out of businesses which have no choice, but there are also reputable merchant services providers like Global Merchant Solutions which are simply willing to help fill the gaps left by unfair traditional banking practices. It’s important to keep an open mind, get educated, and then get the services you need to process credit card payments—you can’t manage a successful business without them.