High Risk Prepaid Cards
The digital era brings us a world of instant gratification and endless options. Customers demand to get what they want right away, and in the most convenient way possible. Part of that convenience includes being able to pay in their preferred method. For businesses, providing multiple payment options is almost always necessary to stay ahead of the competition. That’s where merchant accounts come into play — they serve as the middleman between the merchant, the bank, and the processor to settle credit and debit card transactions.
Not all merchant accounts are equal, however. The type of merchant account you need to acquire depends on various factors, including your industry type, company location, and financial history.
Processors will calculate the risk associated with the nature of your business during the underwriting process when you apply for a merchant account, and depending on the result, you may need a high risk merchant account to expand your payment processing options.
Why Use Prepaid Debit Cards
All businesses need a merchant account to accept debit and credit card payments. Unfortunately, there is no uniform, industry-wide standard that determines whether your business needs a low risk or high risk merchant account. Many times higher risk merchants will seek out the services of a prepaid debit card company to assist with payouts. In fact, the risk designation can differ per provider, as different banks have different policies and guidelines. Generally speaking, however, there is a set of criteria that lists the most common factors that can affect your risk designation.
Do you need to seek a high risk merchant account processor? Here are the differences between a low risk and high risk merchant account for comparison:
Low Risk Merchant Account
- Primary business location is in low-risks regions, such as the European Union, United States, Canada, Australia, Japan, Singapore, or South Korea
- All transactions are in one form of currency
- Products or services sold are low risk, such as apparel
- Card-present with 3D secure processing and other precautions to prevent fraud
- Monthly volume is not more than $20,000 in sales
- Average ticket size is not more than $500
High Risk Merchant Account
- Bad business credit score or financial history
- Company and/or industry has a history of fraud and excessive chargebacks
- Products or services sold are questionable or heavily regulated, such as adult videos and firearms
- Transactions are in multiple currencies
- Business is located in countries or regions with higher instances of fraud and lower online security levels, such as Latvia, Egypt, Mexico, Ukraine, Hungary, Columbia, Philippines, Malaysia, Nigeria, Pakistan, Indonesia, Lebanon, and Yugoslavia
- Startup company, or has very little time in business
- High average ticket size
- Business offers subscription or recurring billing
Of course, there are other factors not included on this list. It is also possible for your business to fall into different categories, especially when you’re selling a wide variety of products.
High risk industries include:
Adult video and entertainment
Antiques and furniture
Cigarettes, tobacco, vaping, and e-cigarettes
Debt consolidation services
Electronics, including computers and computer accessories
Firearms and ammunition
Jewelry and luxury goods
Subscriptions services, including memberships with free trial
The fees you pay depend on whether your business is categorized as high risk or not. Typically, a high risk merchant account costs more than a low risk account, mainly because there are additional features designed to effectively manage the elevated risks. Keep in mind that merchants end up in the high risk designation because they actually carry increased levels of risks, and not just because they failed to manage a high chargeback rate at one point during all the years they’ve been operating.
If you have questions as to whether or not you qualify as a high-risk merchant, consult a merchant services provider.
Using prepaid debit cards as a high risk merchant
In some cases, being designated as a high-risk merchant means you’ll have to go through the critical Know-Your-Customer (KYC) process before you can receive merchant services. Monthly transactions may be limited, or a particular amount of cash reserve may be required. And understandably, because of the associated risks, banks may turn you down. In effect, you need to search for seasoned prepaid debit card providers who specialize in your industry and can truly help you when the expected risks do happen.
Card networks have programs that monitor chargeback rates. When low risk merchants have cases of chargebacks, they are afforded a lengthy work-out period to correct the problem before being penalized. For high risk merchants, however, the consequences are incredibly challenging:
Fees from chargeback penalties are immediately issued (note that the individual chargeback fee for high risk merchants is typically higher than for low risk businesses)
Funds can be frozen, leading to cash flow problems
Your merchant account can be shut down
Fortunately, being categorized as a high risk merchant has its perks. One of the benefits of acquiring a high risk merchant account is leniency when chargeback rates go up. Other advantages of a high-risk prepaid debit card include:
Flexible payment acceptance options, such as:
- Multi-currency capability
- Cryptocurrency acceptance
- Recurring billing
Increased sales volume allowances
Exceptional security features
Fraud protection processing solutions
Fewer limitations and restrictions on international transactions
Susceptibility to fraud and chargebacks is one of the primary reasons merchants are categorized as high risk, so it only makes sense that high risk merchant account providers use the latest tools and technology to combat these issues. These features and security measures ensure that the provider, your business, and your clients are all protected.
In addition, being able to operate in regions other than low risk areas on the list can help your business expand globally. Since low risk merchants require a low risk location, they can be extremely restricted when it comes to processing international transactions. On the other hand, if you’re a high risk merchant trading and processing large tickets overseas, you can cast a broader net and reach offshore markets. In a nutshell, a high risk merchant account allows you to tap into the real purpose of having an online business in the very first place: to sell products or services to anyone with an internet connection, anywhere in the world. Using our prepaid debit card program, merchants do not have to worry about settling to customer bank accounts.
What to Do Next When Processors Identify Your Business as High Risk
While it seems difficult to acquire a merchant account when your business has a high risk designation, there are plenty of high risk merchant account providers who are willing to help your business succeed.
A few tips to keep in mind:
Do your research
Before agreeing to a payment processor, check out their website and look for legitimate proofs of their business, such as testimonials and customer reviews. When you compare the costs between providers, remember that price isn’t everything, so a cheaper deal may not be your best option. Make sure that their customer service is excellent so that when you encounter technical or billing concerns, the payment processor can efficiently resolve the issue with zero or minimal losses on your part.
Read the fine print
There are indeed less-than-reputable payment processors out there, so for your own protection, read your merchant account contract well before closing the deal. Examine all the clauses, as they may result in costing you more money in the long run.
It may be tempting to make white lies when you’re having a hard time acquiring a merchant account, but don’t do it. Processors will eventually figure it out once you start accepting payments, and merchants who misrepresent themselves can be placed on the Terminated Merchant File (TMF).
The key is to choose wisely when seeking out a prepaid debit card processor who can meet your business needs. At EU Paymentz, we specialize in online gambling, forex, cryptocurrency, and global wire transfer solutions. We also offer a high risk payment gateway is fully PCI compliant, with easy navigation, reliable functionality, and stringent security requirements. For more information on what we can do to help you get started, contact us.