High-Risk Merchant Accounts for Authorize.Net: A Comprehensive Guide

High-Risk Merchant Accounts for Authorize.Net: A Comprehensive Guide
By Oliver December 21, 2023

You’ve come to the right place if you are looking for High-Risk Merchant Accounts for Authorize.Net. Authorize.Net, a leading payment gateway provider in the US, offers solutions allowing merchants to accept credit card and electronic check payments online and in person. Established in 1996, it supports over 430,000 merchants and processes a total payment volume of approximately $149 billion. Due to its reliability and comprehensive services, the platform is favored among small and medium-sized businesses in diverse sectors.

Both payment gateways and merchant accounts are essential for high-risk merchants to process credit card transactions effectively. With a suitable high-risk merchant account, a payment gateway like Authorize.net will function optimally.

Selecting the best merchant account provider is essential for efficient online payment processing, particularly for businesses in high-risk sectors. This detailed guide will discuss the leading merchant account providers compatible with Authorize.Net. Let’s dive into how you can find the right provider for your needs.

What Is a High-risk Merchant Account?

high risk merchant accounts

Companies labeled as “high-risk” require a specialized merchant account to process debit and credit card transactions. Such businesses are more likely to experience chargebacks or fraudulent activities, among other risk factors.

The definition of a high-risk business varies, as there is no universal standard within the payment industry. Each bank and payment processor applies its own criteria to evaluate risk.

While some payment service providers explicitly exclude certain industries, others require comprehensive business details to assess risk levels before deciding whether to accept or reject an application. The decision largely depends on the individual payment processor’s policies and approach to managing risk.

Why Do Certain Businesses Require a High-Risk Merchant Account for Payment Gateway Integration?

Many businesses require high-risk merchant accounts to integrate with the payment gateway because payment processors and financial institutions often label certain businesses as “high-risk” due to various factors. Industries such as tech support, travel, CBD, firearms, and nutraceuticals are typically categorized as high-risk. However, operational aspects of your business can also influence this classification.

  • High Chargeback Ratio:

Businesses with a chargeback ratio exceeding approximately 0.65% of all transactions are considered high-risk. High chargeback rates, which occur when customers dispute transactions, may indicate potential fraud or customer dissatisfaction, making such businesses concerned for payment processors.

  • High Fraud or Refund Rates:

Businesses that experience frequent fraudulent transactions or high refund rates are also at risk. This is common in sectors offering digital services like software subscriptions or tech support, as well as those selling physical goods.

Incidents of “friendly fraud,” where customers dispute charges after receiving a product or service, can tarnish a processor’s reputation and increase the odds of being categorized as high-risk.

  • Poor Financial or Credit History:

A business or its owners having poor credit or financial history can trigger high-risk classification due to potential financial instability, which raises concerns about meeting ongoing financial obligations.

  • Subscription or Continuity Billing:

Businesses operating on subscription models, particularly those with automatic renewals or free trials that transition into paid subscriptions, are prone to high chargeback risks. Disputes often arise from forgotten auto-renewals or dissatisfaction with the service.

  • Industry-Specific Risks:

Certain industries inherently carry more risk, such as multi-level marketing (MLM), credit repair, adult services, and highly regulated sectors like firearms or CBD. These industries are considered high-risk due to potential legal and reputational challenges.

Other contributing factors include a reliance on international sales, being a new business without a payment processing track record, or dealing with high-ticket items that may attract fraud or chargebacks. To manage these risks, companies often require specialized high-risk merchant accounts. Although these accounts might impose higher fees and stricter terms, they offer crucial services such as fraud protection and chargeback management, catering to the unique needs of high-risk sectors.

Top 5 High-Risk Merchant Accounts for Authorize.Net

1. Host Merchant Services

Host Merchant Services

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Host Merchant Services (HMS) offers integrations with popular online shopping platforms such as WooCommerce, Shopify, BigCommerce, and Magento. They provide free web hosting, but there is an additional charge for advanced features, including marketing tools. Their pricing model for ecommerce is competitive, with rates as low as interchange + 0.35% + $0.10 per transaction.

For high-risk accounts, HMS uses Electronic Merchant Systems (EMS) to handle online, mobile, and point-of-sale (POS) payments. The company has received numerous positive reviews and holds an A+ rating from the BBB. There have been no registered complaints with Consumer Affairs. Additionally, they provide business financing options, including cash discounts and advance programs.

HMS excels in security, reliability, and payment processing capabilities. It prioritizes customer service, employing more support agents than sales agents and ensuring that support calls are promptly answered within three rings by team members based in the US.

Pricing of Host Merchant Services

HMS charges a monthly fee of $14.99 and applies per-transaction fees, although there are no account maintenance fees or binding contracts. The transaction fees are structured as follows: retail storefronts incur a cost of 0.25% plus 10 cents per transaction, restaurants are charged 0.20% plus 9 cents per transaction, and e-commerce transactions are subject to a fee of 0.35% plus 10 cents per transaction.

While the pricing might be considered high for new or tiny businesses, the fee structure could be justified for larger enterprises based on the value provided.

2. PaymentCloud

PaymentCloud

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PaymentCloud excels as a high-risk payment processor, noted for its exceptional account management service. It caters to a wide range of high-risk industries, providing superior assistance during the application and onboarding process. The company is adept at handling businesses that are on the MATCH list and collaborates with other payment processors such as Payline Data to extend high-risk merchant services.

The strength of PaymentCloud lies in its adaptable and highly customizable payment processing solutions, enabling the company to meet specific business needs. It offers flexible pricing options to match client preferences and supports integration with any existing payment gateway to minimize business disruptions.

Moreover, PaymentCloud is compatible with widely-used point-of-sale (POS) systems, including Clover, and provides a free smart terminal with each merchant account, enhancing the overall service offering to its clients.

Pricing of PaymentCloud

PaymentCloud’s pricing structure includes a monthly fee ranging from $10 to $45. The fees vary and include a virtual terminal or keyed-in rate ranging from 2.9% to 3.4% plus 25 cents per transaction. For transactions swiped through a terminal, the rate is lower at 2.4% plus 10 cents. The fees for high-risk accounts are notably higher, falling between 3.5% and 5% plus 25 cents.

It is important to mention that the virtual terminal rate typically reflects the average cost associated with using Authorize.Net as a payment gateway. Additionally, PaymentCloud imposes a monthly payment gateway fee of $25, but they do not charge an early termination fee for closing an account prematurely.

Additionally, there is a $25 chargeback fee. The provider may also require a rolling reserve of 0% to 10% of the transaction value to cover potential chargebacks and other risks.

3.  Durango Merchant Services

Durango Merchant Services

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Durango Merchant Services (DMS), with over 25 years of experience, has earned a solid reputation for securing merchant accounts for businesses that often face difficulties in obtaining such services. These include auction houses, art dealers, adult content providers, money remittance services, and payday loan companies. DMS supports its potential clients by assigning dedicated account managers specializing in high-risk operations, and it leverages extensive local and international banking connections to help increase approval rates for merchant accounts.

DMS is particularly effective at assisting businesses previously declined by other providers. It also serves businesses listed on the MATCH list. It tailors its pricing strategies to reflect a variety of factors, including the level of risk, the client’s credit history, and the chosen method of payment collection.

Pricing of Durango Merchant Services

Durango Merchant Services does not publicly disclose specific pricing details for high-risk merchant accounts, so those interested will need to contact the company directly to discuss terms. Typically, the service includes a monthly fee of $30, which covers the payment gateway.

The fee structure for e-commerce and Mail Order/Telephone Order (MOTO) transactions is generally based on the interchange rate plus an additional 0.25%. Durango also applies a rolling reserve, which can range from 0% to 10% depending on various factors, and charges a $25 fee for chargebacks.

4. Easy Pay Direct

Easy Pay Direct

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Easy Pay Direct was named to reflect its commitment to simplicity, a priority for many small business owners. The company has crafted its products and services to streamline business operations effectively. It provides a comprehensive solution that efficiently handles high-volume and complex online transactions, improves approval rates, and allows businesses to manage multiple merchant accounts via a single payment gateway. This is all coordinated through a single contact point for ease of use.

Additionally, Easy Pay Direct offers features such as chargeback alerts, decline salvage tools, recurring billing, mobile transaction capabilities, transaction distribution management, and hosted payment pages. The platform supports integration with over 250 shopping carts and facilitates unlimited transactions, even for high-value purchases, enhancing its utility for businesses.

Pricing of Easy Pay Direct

Easy Pay Direct has removed pricing information from its website; however, it previously used a tiered pricing model that began at 2.44% plus $0.17 per transaction. It’s unclear whether the $99 account setup fee is still necessary to begin service. The monthly account fees once started at $24.95 but may now vary.

5. Payline

Payline

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Payline offers a straightforward and affordable solution for merchant services, featuring transparent pricing and an easy-to-navigate platform. It is well-suited for businesses in need of digital shopping cart capabilities that accept all major credit cards, even those operating within high-risk industries.

Payline allows high-risk businesses to try its service for one month without charge, allowing them to assess the platform’s fit for their needs risk-free. Once an application is approved, Payline tailors a custom solution to meet the business’s specific requirements. It’s important to note, however, that processing rates for high-risk industries may be higher than those advertised for lower-risk sectors. Industries that Payline supports include those in the cannabis, travel, and credit repair sectors.

Pricing of Payline

The payment processing fees are structured as follows: for in-person transactions, the cost is interchange plus 0.4% and an additional $0.10 per transaction; for online transactions, the fee is interchange plus 0.75% and $0.20 per transaction. Additionally, there is a monthly fee of $20.

Understanding the Merchant Account Application Process

The application process for a merchant account is usually simple and involves a series of typical steps, although details might differ depending on the provider. Here’s an outline of what to expect:

  • Apply Online: Most providers offer an online application that takes about 5–10 minutes to complete. You will need to enter information about your business, such as its structure, industry, and projected transaction volumes, as well as personal data like your tax ID and personal identification.
  • Get an Instant Quote: After you submit your application, many providers quickly provide a quote based on your business’s transaction needs and risk profile. This quote will detail various fees you might incur, such as transaction fees, monthly fees, and any other charges that may apply to your type of business.
  • Underwriting and Approval: Your application will then undergo an underwriting process, where the provider evaluates your business’s risk level. This evaluation may include reviewing your financial records, credit history, and previous payment processing history. Approval times can vary from a few hours to several days, depending on your business’s complexity.
  • Setup and Start Processing Payments: Once your application is approved, the provider’s support team will help you set up your merchant account. For online businesses, this includes integrating payment gateways, and for physical stores, it includes setting up point-of-sale (POS) systems. There is typically a testing phase to ensure all systems operate smoothly before you begin accepting payments.

Integrating Your High-Risk Merchant Account with Authorize.net

After your high-risk merchant account is approved, the merchant account provider usually handles the integration with Authorize.Net. They will link your account to Authorize.Net and set up key fraud prevention tools, including the Credit Code Verification (CCV), Address Verification Service (AVS), and Advanced Fraud Detection Suite (AFDS). These settings can be modified later to suit your business needs better.

Following approval, you will receive a Welcome Email with your merchant account details and Authorize.Net login credentials, allowing you to start processing payments.

Steps for Virtual Terminal Payments:

  • Log in to your Authorize.Net account.
  • Select “Tools” from the main menu.
  • Choose “Charge a Bank Account” or “Charge a Credit Card.”
  • Enter the customer’s payment information and submit the transaction.

Steps for E-commerce Integration:

  • Log in to Authorize.Net.
  • Find your API Login ID and Transaction Key.
  • Enter these keys on the configuration screen of your shopping cart platform.

For additional help or setup, resources like the Authorize.Net Getting Started Guide and configuration tutorials are accessible through their support channels.

Conclusion

Securing a high-risk merchant account for your Authorize.Net payment gateway is a crucial step for businesses operating in industries that face higher transaction risks. By selecting the right merchant account provider, you can ensure smoother payment processing, mitigate the impact of chargebacks and fraud, and maintain your business’s financial health.

The providers highlighted in this guide, such as Host Merchant Services, PaymentCloud, and Durango Merchant Services, offer tailored solutions that cater specifically to high-risk industries. They provide the security and support needed to thrive in a challenging marketplace. With the right partnership, you can focus on growth while managing payment complexities effectively.

Frequently Asked Questions

Using a high-risk merchant account with Authorize.Net provides advanced fraud prevention, strong security, and efficient chargeback management. It helps businesses in high-risk industries process payments securely and avoid disruptions.

Businesses in high-risk industries face more chargebacks and fraud than standard ones. High-risk merchant accounts offer tailored services like better fraud detection and flexible underwriting, ensuring companies can operate smoothly and avoid account closures.

Businesses should ensure the provider integrates smoothly with Authorize.Net, offers competitive transaction fees, strong security features like PCI compliance, and reliable customer support to resolve issues quickly.