High Risk Merchant Account vs. Low Risk Merchant Account
The ability to process credit cards is not without risks. Depending on the type of business you run, or the service you offer, will determine the level of risks you will incur. Meaning are you considered high risk or low risk.
A low risk merchant account is a business or service that processes credit card transactions in person. This is done using an old-fashioned card swipe machine, or a cash register with integrated credit card terminal. These companies are considered low risk simply because they can physically handle the credit card, thus verifying authenticity. They also keep signed copies of all printed receipts. These help to ensure they almost never have to deal with transaction disputes. Low risk merchants include business types such as: restaurant, retail stores and grocery stores. Any business that manually performs credit card processing is considered a low risk merchant, and they normally will receive lower rates.
On the opposite end of the spectrum are the high risk merchant accounts. These companies do almost all of their business transactions online, by phone, or by mail order. Credit card processing is completed via a virtual terminal or ecommerce payment gateway provided by a high risk merchant account processor; or by a gateway payment processing provider.
High risk merchants are diverse and include many types of businesses such as dating services, travel agencies, computer software, furniture and general ecommerce websites, just to name a few.
The risks associated with the high risk merchant account are greater due to a higher volume of transaction disputes, fraudulent purchases, and charge backs by the customer. This in turn increases the rates and fees associated with the high risk level.