A lot of challenges come with being tagged as a high-risk merchant. From a high sales volume and international clientele to products or services frequently prone to fraud and even excessive chargebacks, there are several potential reasons a business is considered high risk. As a high-risk merchant, especially in California, you’re going to have a harder time finding a payment processor because banks would usually shy away from high-risk businesses. High-risk merchant laws in California are fairly strict, which can make it a bit more challenging, but protects businesses in the long run.
Even if you’re tagged as a high-risk merchant, the government will still allow you to process credit and debit card payments if you have a high-risk merchant account.
Finding the right payment processing partner will not only help you stay in business but also allow you to pay off debt and improve your business’ credit rating.
All American states, not only merchant laws in California, require high-risk businesses to open a reserve account that’s separate from their capital.
Since you’re a high-risk merchant, you need money to serve as a buffer in the circumstance that your business has a high chargeback rate. This ensures that the capital and revenue won’t have to suffer if there are any issues with your business.
A high-risk merchant account allows businesses that would otherwise struggle to find a payment processor to actually run their business, but it comes at a cost–higher fees compared to a low-risk merchant.
Instead of looking at it as a disadvantage, you have to remember that these higher charges also come with benefits.
California, as well as the rest of the country, follows a general rule of thumb when it comes to tagging businesses as low- or high-risk.
When one financial institution or bank determines that you are a high-risk merchant, you will be tagged by all other institutions in your area. If you comply with the high-risk merchant laws in California and work on improving your financial standing as a business, though, your high-risk status can change.
Financial institutions may review your business periodically or you can petition to have your business reevaluated to determine whether it’s now low-risk.
Regardless of the type of business you own, it’s very important to follow high-risk merchant laws in California. You just need to keep working on improving your business finances, train your staff to look out for cases of fraud, and make sure that you implement best practices when running your business.
Being tagged as a high-risk merchant is not easy, but there are ways to ensure smooth operations when you open a high-risk merchant account in California for your business. Contact our team to learn more about the merchant services we offer.