The High Risk Merchant

A high-risk merchant is a type of company that is more susceptible to a loss in revenue due to credit card based refunds or disputes. Common high risk companies include adult escorts, gambling and betting venues, firearms dealers, and even travel agencies and airlines. An airline, for instance, is considered high risk due to the amount of credit card refunds that must be processed due to weather-related cancellations. While the average consumer may not give much thought to this, the truth is that just as processing a credit card payment takes time as well as money, refunding a payment to a credit card also dips into both of those resources.

Companies can safeguard themselves against excessive credit card refunds and disputes by taking the following proactive measures:

clearly posting concise guidelines about making purchases
drawing up written and signed agreements and contracts relating to work performed, services rendered, or plans made
always obtaining a signature for any credit card transaction
keeping detailed logs of all purchases made

Still, even the most meticulous and careful of high risk merchant companies is still going to be labeled as high risk, and thus have to deal with the inconveniences and expenses associated with a high risk merchant account. A high risk account provider is a financial institution who will extend credit card processing services and possibly a line of credit to a high risk company, despite the implied and actual financial risks involved. But this graciousness doesn’t come without a cost to the company who needs credit card payment processing: they will see an increase in monthly expenses, due to both per-transaction fees charged by the credit card processing company, as well as monthly and possibly yearly fees. There are paperwork filing and account setup fees to consider as well.

Still, even for the high risk merchant, there is not another option: since the majority of consumers prefer the convenience and increased security of using a credit card for many purchases, all merchants, both low-risk and high-risk, should accept them in order to not alienate any possible source of revenue.

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