Many processors and banks deem certain types of businesses high risks. These businesses could include travel merchant accounts; pharmacy merchant accounts; adult merchant accounts; telemarketing merchant accounts; Internet merchant accounts, etc.
Banks or other processors consider these accounts high risk because of the potential for excessive charge backs, possible legal violations, returns, or simply bad publicity for accepting those sorts of businesses. High-risk merchants often find difficulty in opening merchant accounts.
Banks and other processors have stringent laws for high-risk merchant accounts. They will invariably evaluate the merchant’s case on certain information like how long he has been in the business, his credit history, and other merchant accounts he has previously held.
In such cases, the duration of time that the merchant’s business has been operating would make a telling difference. If his business has been around for a good length of time, it would act as an assurance to the merchant account provider. It would mean that the merchant has a decent understanding of running a business and the high risks that come with the territory.
Also, providers generally go through the merchant’s credit report. This is to confirm his capacity to repay loans and reveal any data on bad credit, such as bankruptcy. A higher credit score would mean that the chances of the merchant opening his account are also higher.
For someone who has already held a merchant account, the manner by which he had managed his past account would reflect in a negative or positive light on the current application. If the merchant or the provider had terminated the previous merchant account, it will show up on the records.
The providers would also verify information like default payments and charge backs on the merchant’s previous account. The more of these he has, the lesser the chances of the merchant opening a high-risk merchant account.