Offshore Merchant Account Overview
In the world of eCommerce there are two types of merchant accounts with those being the standard eCommerce account and the offshore merchant account. Offshore merchant accounts are required for any business categories which are classified as a high risk business. There are several reasons why a business might be classified in the high risk category and thus need a high risk merchant account. These reasons include the business niche may historically have been associated with an increased risk of fraud, the business having an age restriction such as adult sites, the business having a high number of returned items such as faulty equipment, the business having a high number complaints or the business is in a specific niche where income can be unsteady making paying bills hard, for example a Christmas card merchant. A offshore merchant account is required for these types of businesses especially if they are doing substantial sales through credit card payments.
Another reason that you may be rejected for a standard eCommerce account is due to the business or business owners having a poor credit history. Businesses who have owners with poor credit history, due to previously failed businesses leaving unpaid bills, will find it very hard getting even a offshore merchant account. In the cases where the application is accepted there is likely to be a “risk” fee associated with the high risk merchant account. If you are unable to obtain a high risk merchant account from a service provider do not be disheartened and you should try multiple high risk merchant account providers. Different high risk merchant service providers have differing amount of risk tolerance and what may not be acceptable and too risky by one provider may not be regarded as such a high risk by another provider.
If the business you run has fallen into a business category that has been classified as a high risk category, or you have poor credit history, then you are going to need to obtain a high risk merchant account. This is because a standard eCommerce merchant account application will usually be rejected. But before obtaining a high risk merchant account you should always first try to obtain a standard eCommerce merchant account as this is a much simpler and cheaper alternative. When attempting to get a standard eCommerce account you should try service providers from within the United States of America first as they are usually the cheapest and most trusted by customers. After this try for an eCommerce account with an international service provider as this will be cheaper then a high risk merchant account in the United States of America. They next best option is a high risk merchant account within the United States of America and then finally any service provider from international locations. High Risk ACH may be another alternative to consider, if accepting checks is useful in your business.
When trying to find a offshore merchant account you should always read the fine print on any terms and conditions as these form your contract with the service provider. In particular you should note anything that may cost you money when using your offshore merchant account. You should also do a lot of research on the service providers and what they offer. Many have different hidden fees and depending on your business the hidden fees from one merchant may be more suited to your business then the hidden fees from another high risk merchant account provider.
The only advantage of a offshore merchant account is that you can obtain a merchant account when it would normally not be available to you and thus you can continue or start doing business. The disadvantage is that you are going to need to pay a much higher fee for having a high risk merchant account compared to a standard eCommerce merchant account. Another disadvantage is that a lot of the high risk merchant account providers are internationally based. Being internationally based adds an amount of risk to you and your customers as there are different laws in different countries and understanding these laws can be quite complex if something goes wrong with your high risk merchant services provider.
