Do You Need A High Volume Merchant Processing Account?

November 1, 2022 by Irongate Payment Solutions

High sales volumes, month-on-month, are something that every business owner dreams of. But they usually bring with them some real challenges that merchants find rather difficult to deal with.

These may include greater risks of fraudulent transactions, chargebacks, and incidents of friendly fraud. In fact, worldwide losses from payment card fraud—both friendly and conventional—surpassed $32 billion in 2021.

Furthermore, businesses that have high average ticket prices (e.g., those dealing in luxury goods like jewelry or furniture) often attract criminals. A single fraudulent sale or return of such goods could mean a massive loss for the merchant. 

These merchants, therefore, need reliable processing solutions from a merchant processing service provider that specializes in high volume merchant accounts. Such providers are well versed with the challenges of high-risk credit card processing and can tackle them with ease.

What Is High-volume Payment Processing?

Typically, businesses that process payments of at least $100,000 every month are considered to be high-volume businesses. This figure, however, may differ from processor to processor. In general, most processors fix the transaction limit for merchants between $2,000 and $10,000 per month. 

If a merchant consistently processes more than their transaction limit, their funds may be put on hold because of high volume processing. In some cases, the credit card processor may even suspend the merchant account and begin an investigation. This is done to keep a check on fraudulent merchant accounts and financial scams involving stolen credit cards.

Essentially, the processing limit protects high-volume payment processing service providers from damage that can be inflicted by merchant accounts having no transaction limits.

What Is a High Volume Merchant Account?

A high-volume merchant account is one that is specifically suited for merchants with higher than normal processing volumes. It offers the same services as all other merchant accounts, such as processing debit card and credit card payments (Visa, Mastercard, Discover, American Express, etc.), providing access to payment gateways and virtual terminals, and depositing funds in your bank account.

The main difference, however, is that you can process higher transaction volumes than usual through a high-volume merchant account. Its biggest benefit is that you’re free to grow your business and sales volumes without worrying about any checks or restrictions.

High-volume merchant accounts also come with higher levels of security to safeguard your transactions. This may require your customers to go through an elaborate verification process to ensure their legitimacy. 

High volume = High fees

High-volume merchant account providers often provide volume discounts on their processing fees. That said, with some providers you can easily find yourself paying more for credit card processing (compared to regular merchant accounts) since payment processors consider high-volume businesses to be high-risk. You may also expect:

• Lengthier contracts

• Early termination fees

• Higher account fees

• Higher chargeback fees

• Rolling reserve requirements

• Additional documentation requirements

High Volume Merchant Account vs High-risk Merchant Account

Often, the terms “high-volume merchant account” and “high-risk merchant account” are used interchangeably in merchant processing. While there may be some overlap, there is a fundamental difference between the two. 

To open a high-volume merchant account, you must prove that you are a legitimate and creditworthy business owner, processing more than $100,000 every month. (Obviously, this figure would vary from one processor to another).

On the other hand, a high-risk merchant account is usually reserved for businesses that have a bad credit history. Also, some industries are inherently high-risk in nature, and businesses from these industries are labeled high-risk businesses. Some of these high-risk industries include:

• Adult related eCommerce 

• Air charters

• Bail bonds

• Check cashing

• Collections agencies

• Coins/collectibles

• Credit repair and restoration

• Dating websites

• Debt relief/consolidation

• Direct marketing/MLM

• Document preparation

• eCommerce

• eCigarettes and vape

• Furniture

• Gentlemen’s clubs

• How-to businesses

• Jewelry

• Legal advisory

• Magazine subscriptions

• Penny auctions

• Online CBD

• Web development

This isn’t an exhaustive list but should communicate the idea of high-risk industries pretty well. As such, any business that belongs to these industries will require high-risk merchant services.

So technically, a high-risk merchant account and a high-volume merchant account are two different things. But the latter can also be considered high-risk because the processor accepts higher risk by approving the merchant account. 

What Factors Determine If Your Business Is High-risk?

A number of factors can get your business classified under the high-risk category with a payment processor. These include the following:

1. Higher-than-average processing volumes. As discussed above, if your monthly sales volume is very high—because of high average ticket prices or transaction volumes—you are likely to be considered a high-risk business.

2. New businesses. If you’re running a relatively new business that has little to no credit card processing history, you may be deemed high-risk.

3. International payment processing. If you conduct business in countries that have a higher risk of fraud, you could be labeled high-risk. As such, conducting business in places like Canada, Europe, Japan, or Australia is typically considered low-risk.

4. Poor credit history. If your business has a bad credit score, you’re likely to be labeled high-risk—at least till you prove that you can meet your financial obligations.

5. High-risk industry. Your business may also be considered high-risk if you operate in an industry where the risk of returns, fraud, and chargebacks is high.

If your business meets any of the criteria mentioned above, you may need a high-volume merchant services provider.

What Documents Do You Need to Apply?

To apply for a high-volume merchant account, your processor will typically ask you for the following documents:

• A valid government-issued ID like a passport or driver’s license

• A secure and functioning website

• A bank letter or voided check

• Bank statements for the previous three months

• Processing statements for the previous three months (if applicable)

• Your Social Security Number (SSN) or EIN (Employer Identification Number)

• Documentary evidence of chargeback ratio below 2%

What Does the Underwriting Process Look Like?

The purpose behind underwriters reviewing high-volume merchant applications is to ensure that they don’t end up carrying any unnecessary risk. Companies with a strong business foundation and those that comply with rules and regulations are more likely to be approved.

Underwriters would determine a merchant’s risk by reviewing their website, processing history, credit score, and bank statements. These are necessary to ensure that the merchant does not have any outstanding bills, negative bank balances, or previously terminated merchant accounts. 

Underwriters are also interested in a merchant‘s chargeback ratio. Plus, they want to ensure that the merchant‘s website is secure, and has clearly-stated, easy-to-understand refund/privacy policies. 

As such, businesses that have some savings and zero debts or outstanding bills have a higher likelihood of getting approved.

How to Increase Your Chances of Getting Approved

If you put in the time and effort to present your business in the best light during the application process, you are more likely to get approved. That doesn’t mean you must resort to “window dressing.” It’s best to provide accurate facts and figures to the processor and build trust based on your strengths.

In general, the following practices can increase your chances of getting approved.

Limit your chargebacks

Excessive chargebacks can significantly increase the riskiness of your business in the eyes of the payment processor. That’s why it’s important to have a clear return and refund policy.

It is also necessary that you put in the right practices and procedures for chargeback prevention. These can vary from business to business. For eCommerce stores, this could mean paying special attention to picking and packing the right products every single time. If customers receive the correct order (with high-quality items), the rate of returns will significantly decline.

A payment gateway that transmits card data to the processor securely can also help to reduce disputes significantly. Likewise, the use of Automatic Clearing House (ACH) payments and eChecks are also known to reduce chargebacks. Make sure that you add clear billing descriptors (e.g., merchant’s name and contact info, return and refund policies, etc.) to all correspondence.

Prevent fraud

Higher fraud rates can spike your risk levels significantly. To prevent fraud, merchants must put the right digital procedures in place. Working with companies that can prevent fraud and manage the associated risks for you is therefore important. 

Fraud prevention can be done by introducing methods like electronic ID verification. For orders that seem suspicious, merchants should seek a digital signature from their customers. You may also want to avoid doing business with countries that have a reputation for fraudulent transactions.

Can You Increase Your Credit Card Processing Limits?

The processing limits of high-volume merchant accounts are determined based on two main factors:

• Your monthly processing volume, and 

• Your high ticket sales

Once you surpass your current limit, you may request your merchant services provider for an increase in your merchant account processing limit. A business with a volume cap of say $100,000, can request an upgrade to $150,000. However, whether your processor approves or denies your request will usually depend on:

• Payment methods used

• The credit score of your business

• Your processing history

• Recurring billing (higher possibility of chargebacks)

• Your reason behind the increase

• The type of industry your business operates in 

• Bank balances of your business account