What Are High Risk Merchants?

A high risk merchant is a business that sells products or services to consumers who are at greater risk of losing money if they do not pay their bills on time, and/or have an outstanding balance due.

A high risk merchant may be a company that provides credit cards, loans, mortgages, auto financing, insurance policies, etc. to customers with poor payment histories.

How Do I Become A High Risk Merchant?

There are many ways you can become a high risk merchant. For example:

1. You could offer credit cards to your customer base. This would mean that the consumer has less cash available for other purchases, but it also means that he or she will be more likely to make payments on his or her card.

If the customer does not pay the bill in full by the end of the month, then the bank will charge interest on the unpaid amount. The higher the rate of interest charged, the more profit the merchant makes from this transaction.

2. You could sell insurance policies to your customer base. Insurance companies typically require that the person applying for the policy have a good history of paying his or her bills on time. This means that the consumer will probably be able to get better rates than someone without such a record.

3. You could provide financing for cars, homes, boats, etc. to people with bad credit records. Again, these types of businesses usually require that the applicant have a good payment history.

4. You could sell life insurance to your customer base, provided that the customer has no health problems that might prevent him or her from being able to work.

In order to qualify for coverage under most policies, the insured must show that he or she has been gainfully employed for at least two years prior to purchasing the policy.

5. You could sell credit repair services to your customer base. These services generally involve helping the customer improve his or her credit rating so that he or she can obtain lower-interest rates on future loans.

6. You could sell mortgage refinancing. Most banks will only refinance a home loan when the borrower’s current monthly payment is equal to or less than 30% of the original principal amount of the loan.

If the borrower’s debt load is too large, then the bank will not even consider refinancing.

7. You could sell car leasing contracts. Leasing contracts often allow the buyer to avoid making any down payment until after the first few months of the contract.

This means that the buyer can buy a new car at a very low price because he or she does not need to put up any money right away. However, if the buyer fails to make payments on time, then the bank will repossess the vehicle and resell it at auction.

8. You could sell payday loans. Payday lenders lend money to borrowers based upon the fact that they expect to receive repayment within 14 days. They charge extremely high interest rates (typically around 400% per year).

9. You could sell installment plans for appliances, furniture, computers, etc. Many retailers offer installment plans as an incentive to encourage customers to purchase their products. For example, you may advertise a $500 television set at 10 percent interest over 36 months.

10. You could sell gift certificates. Gift certificates are like store credits. You give them out to friends and family members who shop at your store. When the recipient uses the certificate, you deduct the value of the certificate from the total cost of the item purchased.

11. You could sell prepaid phone cards. Prepaid phone cards are sold by many companies. The company sells the card in advance, and then gives the purchaser a certain number of minutes to use. After the minutes run out, the user needs to recharge the card before using more minutes.

12. You could sell vacation packages. Travel agencies sell vacation packages to clients. The client selects a destination, and the agency arranges for airfare, hotel accommodations, rental cars, ground transportation, sightseeing tours, meals, entertainment, and other travel related expenses.

13. You could sell vacation rentals. Vacation rentals are homes that are available for rent during vacations. Some people prefer this option because they do not have to worry about cooking, cleaning, laundry, grocery shopping, and other household chores while they are away.

How Do I Get A High-Risk Merchant Account?

1. Through A Bank

Banks usually require that merchants apply directly to them. Banks typically charge higher fees than third party providers. In addition, some banks require that a merchant be incorporated in order to open a business account.

2. Through A Credit Card Processor

Third party processors specialize in processing transactions for various types of businesses. These services include credit card processing, check cashing, bill paying, and cash advances.

Third party processors provide these services without requiring that merchants obtain a merchant account through a bank. Instead, they work with banks to process transactions. Third party processors also take a fee for providing these services.

3. Through A Payment Gateway Provider

Payment gateway providers specialize in processing online transactions for various types of websites. Examples of payment gateways include ClickBank, PayPal, Google Checkout, Amazon Payments, and others.

Payment gateway providers do not require that merchants obtain a merchant account through a bank or third party processor. Rather, they allow merchants to accept payments on their website.

Payment gateway providers often charge a transaction fee for accepting payments.

4. By Using Your Own Personal Computer (PC)

Some small businesses choose to operate entirely online. They can accept payments for goods and services via credit card, debit card, electronic checks, money orders, or even cash. This type of operation is called an ecommerce site.

Agent Merchant Vs. Non-Agent Merchant

Firstly, you must decide whether you want to be an agent merchant or a non-agent merchant. An agent merchant has its own merchant account with a financial institution such as a bank or a credit union. It receives all of its funds directly.

You must find a merchant account provider that accepts high risk businesses. Next, you must apply for a merchant account with the provider. Once you have been approved, you will be able to accept credit card transactions.

Conclusion 

To conclude, a high-risk merchant is a business that sells products or services to consumers who are at a higher risk of losing money due to other obligations such as bill payments or who currently have an outstanding balance to be paid elsewhere.

These merchants can offer insurance or loans to customers with poor credit histories.

To round out your knowledge on this subject, feel free to visit our credit card processing hub.