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A merchant account is required in order to receive credit card payments. For some industries, merchant accounts can be more difficult to obtain as they are thought to be a high risk by the merchant account provider. Such industries include:
• Replica Products
• Dating
• Telemarketing
• Adult
• Multi-Level Marking
• Cell Phone
• Auctions
• Travel
• Pharmacy
Banks and third party merchant account providers consider these industries a higher risk due to a higher level of charge backs, returns/refunds and credit card fraud. As a result of the high risk associated for the provider of the merchant account, there are higher rates associated with merchant accounts.
It can be difficult to obtain a high risk merchant account from a bank and in most cases can also be quite expensive. Typically speaking, banks do not provide merchant account services to high risk merchants, if they do their rates will be higher than available from a third party provider. Third party merchant account providers can provide accounts to high risk merchants as they have relationships with multiple banks, allowing them to ‘spread’ around the risk.
Due to many competing third party providers, rates for high risk merchant accounts can be significantly lower than those from a bank. However, the rates will be higher in order to offset the risk involved. Typically, application fees for a high risk account range from $500 to $5000, though not all providers charge application fees. Then there are two charges that occur each time a transaction is processed:
• The transaction fee is a flat rate fee between $0.35 and $0.75
• The Discount Rate is a percentage of the transaction amount, and is usually anywhere from 3% to 15% for a high risk merchant.
Other fees include monthly statements and services such as fraud protection, as well as charges for refunds and charge backs.
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