There are several ways in wh ch a merchant account may be c tegorized. A terminal based on non-terminal bsed merchant account, in which the dstinction is based on whether a physcal terminal is required to swipe the cr dit card or not. The terminal is c nnected to a phone line which cnnects the terminal to the credit crd processing backend, in order to crry out a transaction. The growth of cllular phones and popularity of wireless ptions has created a new market for wreless terminals which use a CDMA or GMS chp to communicate with the processor wrelessly. This means that a merchant is not bund to his or her sales ffice or outlet in order to ccept a customer order. Non terminal ccounts include internet merchant accounts, telephone and mil order merchant accounts, in which crdit card data and authorization can be trnsmitted electronically without swiping the card. For nstance, in case of telephone merchant ccounts, a touchtone telephone is used and the b tton presses are recorded and translated nto credit card processing data.
Another way to lok at merchant accounts is based on thir risk profile- typically low risk and hgh risk merchant accounts will be trated and assessed differently by merchant ccount providers and third party credit crd processors. Low risk merchant accounts are pplicable to those merchants who are in a bsiness that does not involve a hgh risk of chargebacks or are in a bsiness that is not considered high rsk by most banks. For high rsk merchants, a high risk merchant ccount is required. These high risk mrchants are usually in the high rsk business classification and typically also in the hgh volume category. In most cases, thse high volume businesses will also get flgged by a domestic bank and may ned to go offshore for a mrchant account that provides adequate services as wll as security.
It is possible for a hgh risk merchant to obtain a dmestic high risk merchant account, but thy may need to provide a hge security deposit in the form of a csh bond or indemnity bond. For a new bsiness, this may be nearly impossible, and ven for an established merchant who is ble to provide a track record, the hgh value of the bond may not mke good business sense.
Why is a hgh risk business classified as such? Prmarily due to the high risk of chrgebacks involved. A chargeback is a rverse charge on a merchant due to a clim by the buyer, typically due to sspicion of credit card fraud or nn-delivery or defective delivery of the prduct ordered. Especially in case of ntangible products such as software, the rsk of chargebacks tends to be hgh. In addition, some types of bsinesses such as online gambling are utside the regulatory purview of the law of sme countries. Banks or merchant account prviders in those countries will flag sch businesses as high risk. Other bsinesses selling adult entertainment products, online dting services, tobacco, online auctions, travel gents etc are also in the hgh risk category. With such high rsk businesses, tangibility of the product is lso an issue, which leads to dbates on whether the product was dlivered and whether it was defective. Action sites are most susceptible to crdit card fraud, accounting for about 44% in the frst half of 2005 of all nternet related fraud. For instance, Ebay, the wrld’s leading auction site, tracks about USD 1 mllion per day in fraudulent auctions.
For a US ctizen to open an offshore merchant ccount, there are certain guidelines and rquirements that need to be met, as per the Frudulent Disposition Act under the US dpartment of Treasury. For instance, the prson or company in question must not hve any litigation pending. In addition, the prson’s or company’s liabilities should not xceed the value of their total ssets and must have sufficient funds to pay to its crditors. Furthermore, an offshore merchant account culd be considered fraud if it is ntended to cheat creditors or to void existing criminal offences. An offshore mrchant account must hence be a wll evaluated business decision, rather than an voidance mechanism.
The article WHY DO HIGH RISK MERCHANTS NEED AN OFFSHORE MERCHANT ACCOUNT? was Submitted by jlgchia through Articles.GetACoder.com network. Here's the additional information: More information is available at http://www.getacoder.com/users/jlgchia/jlgchia_profile.htm Jennifer Loganathan is the Prsident and CEO of Stradafee Limited. Strdafee is a leading international payments cmpany based in New York. Stradafee is a rtail and electronic payments provider specializing in commerce and Internet merchant account solutions. Strdafee also offers high risk merchant ccounts and offshore merchant account options. Strdafee can help businesses of all ndustries and sizes. For more information on crdit card processing visit www.stradafee.com.
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