High-risk credit card processing and merchant accounts

  • High-risk credit card processing and merchant accounts can provide companies with reliable payment processing services with high chargebacks and refunds.
  • Excessive chargebacks, typically over 0.9% of your transaction, can automatically put you in a high-risk category.
  • High-risk credit card processing and merchant accounts may offer multiple currency support and chargeback protection.
  • This article is intended for business owners who operate in an industry with a high risk or high rate of chargebacks and are considering a payment processing solution.

Whether your business falls into a certain industry category or has a high chargeback or refund ratio, it can be considered high risk. However, most business owners don't realize they are at high risk until they start applying for a merchant account to process their monthly transactions for ACH, debit and credit cards.

According to Bankcard, chargebacks increase by 41% every two years—a threat that should be on every entrepreneur's radar. Chargebacks don't just happen because of fraud; They can also arise from simple cardholder claims, such as “items were not described” or “merchant was not received.”

Once your company is denied a merchant account from traditional banks, it can be overwhelming to navigate the high-risk credit card processing and merchant account providers. Read on for basic information along with pro tips to help you choose the right provider for your company.

What is a high risk merchant account?

A high-risk merchant account helps high-risk businesses, whether by industry or business practices, have top-notch payment processing services.

If your business has a large number of chargebacks and refunds each month, you may be subject to a rolling reserve on your account, which can help cover transaction issues and fraud.

did you know?FYI: To be approved for high-risk credit card processing and merchant accounts, you'll need to organize all of your business finances. Be prepared to provide financial statements, banking records and tax returns for review.

High risk vs low risk merchant accounts

Before applying for credit card processing and merchant account, you need to decide whether you are a low risk merchant or a high risk one. While merchant account providers generally classify businesses into one or the other, several factors can separate the two.

high risk merchant account

Your processing history – and, in particular, your chargebacks – could put you in a high-risk category. Merchant account providers can add their own characteristics to the list, but here are some of the features that will mark your business as high risk:

  • $20,000 or more in monthly sales
  • Credit card transactions that average $500. More than
  • Trade with countries known to have high levels of fraud
  • history of bad credit
  • frequent chargebacks

TipTip: When applying for high-risk credit card processing and merchant accounts, be as detailed as possible in your industry description. If you try to rein in your company's methods, you may receive an incorrect rate quote.

low risk merchant account

A low-risk trader may need to meet several requirements; However, the most important are: low revenue, few transactions, and low chargebacks and returns. These are additional features of the low risk trader:

  • Credit card transactions are $500 or less.
  • Transactions add up to less than $20,000 monthly.
  • Industry is considered low-risk – such as essential goods, clothing, household and baby goods.
  • Chargeback ratio is low – less than 0.9% of total transactions.
  • Trade is accomplished in low-risk regions – such as the United States, Europe, Japan, Canada and Australia.
  • The rate of return is low.

What types of businesses require high-risk merchant accounts?

Here is a list of industries that require a high-risk merchant account:

  • 1-800 Chat Site
  • adult content
  • Airlines or Airplane Charter
  • annual contract
  • Ancient
  • Attorney Referral Services
  • auction
  • automotive broker
  • bankruptcy attorney
  • restricted or illegal goods and services
  • brokerage
  • “Business Opportunities”
  • car parts
  • casino, gambling or gaming
  • chain letter
  • check-cashing services
  • Cigarette, e-cigarette, vape or CBD shops
  • Coins, collectibles or autographed collectibles
  • Collection agencies and other debt collection services
  • Coupons or Reward-Points Program
  • Credit protection, counseling or debt repair services
  • dating services
  • direct response marketers
  • drug paraphernalia
  • E-Books (Copyright Content)
  • Electronics
  • event ticket broker
  • extended warranty companies
  • Fantasy Sports Website
  • Finance brokers, financial counseling or loan modification services
  • furniture seller
  • indirect financial consulting
  • game codes and hacks
  • Receive get-rich-quick books and events
  • health and wellness products
  • high average ticket sales
  • how-to websites
  • Horoscope, astrology or psychic services
  • promotional products or services
  • Hypnosis Specialists or Self-Hypnosis Services
  • International shipping, cargo or import/export services
  • Internet Service Provider and Hosting Services
  • iptv services
  • life coach
  • lingerie sales
  • lottery or sweepstakes
  • magazine sales
  • mail or telephone order sales
  • medical care program
  • subscription-based companies
  • money transfer services
  • Merchants on Terminated Merchant File (TMF) or MATCH List
  • merchants with bad credit
  • modeling or talent agencies
  • multi currency sales
  • Multilevel Marketing (MLM)
  • Music, movie, or software download or upload
  • Nightclub or Cabaret Bar
  • nutraceuticals
  • Offshore Corporation Installation Services
  • mortgage shops
  • phone-locking services
  • prepaid calling card
  • prepaid debit card
  • real estate
  • Replica Handbags, Watches, Purses & Sunglasses
  • self defense, pepper spray or mace
  • SEO Services
  • Smartphones – Sale, Resale & Spare Parts
  • social networking sites
  • sports forecasting or betting
  • Subacquisition / Merchant Aggregation
  • subscription-based billing
  • Technical support and web development
  • timeshare or timeshare advertising
  • Tour operator
  • Travel clubs, services or agencies
  • holiday planner
  • vacation rentals
  • Vitamins and Supplements Sales
  • VoIP Services
  • Weapons of any kind, including parts

What Makes a Business High Risk?

Here are some reasons why your business may be considered high-risk.

  • New Business: If your company was recently established, you cannot submit a comprehensive transaction history to the financial institution.
  • Not enough transactions: A merchant account provider needs to calculate your chargeback ratio. If you don't do enough transactions each month to score an average, it can put your business in a high-risk category.
  • Industry Type: Certain industries – such as travel, gambling and adult sites – are particularly known for exorbitant chargebacks due to the high number of cancellations.
  • Multiple chargebacks, refunds and frauds: After your business receives a large number of monthly transactions, your risk increases if you have high average chargebacks, refunds or fraud.

Advantages and disadvantages of high risk merchant accounts


Here are some of the benefits of a high risk merchant account:


Here are some disadvantages of a high-risk trader:

  • high processing fee
  • Potentially mandated reserve account, which can be as high as 50% of the monthly amount
  • Rolling reserve which can be kept for 180 days from the date of closure of the account

What to consider when looking for a high risk trader

When you search for a high risk merchant account, you will see that there are many options available. It's important to do your research before choosing one, as it can affect how much time you spend monitoring transactions and how this may affect your future finances.

There are a few features you should consider when selecting a high-risk credit card processor:

  • Timely Support: Any erroneous transaction through your website can cause issues that quickly snowball. Choose a provider who offers proactive support and has your back when it comes to a problem.
  • Custom Payment Options: Your provider should be able to meet your complex business needs by enabling custom payment forms that allow multiple payment scenarios.
  • No hidden fees: Make sure you know all fees in advance. High-risk credit card processing and merchant account monthly costs should be easily found on the provider's website. If not, a quick phone call or chat should be able to answer all your questions.
  • Up-to-date technology: Your payment partner should be aware of payment trends and provide an open API. Onboarding should be seamless and should take days, not weeks. Avoid high-risk payment processors that have outdated websites, excessive downtime and lack the technical knowledge needed to meet your business needs.
  • Anti-fraud tools: Since high-risk accounts are subject to fraudulent behavior, look for a merchant account that has enhanced security measures — including chargeback prevention and multifactor authentication.
  • market leadership: Choosing a high-risk merchant account can take time, and you also need to take into account the time for onboarding and customization. Choosing a reputable company not only saves your time, but also protects your money.
  • Customer Support: If your business operates in a certain industry, several industries or with a diverse group of countries, choose a credit card processor that can meet all of your unique needs. Industry and country support should be readily available on the website.

did you know?FYI: Many high-risk merchant account providers try to lock their clients into long-term contracts. Just because you need this service now doesn't mean you'll always need a high-risk credit card processing and merchant account. Choose a company that allows you flexible contract terms, such as month-to-month contracts.

Since a high-risk merchant account is more strict than a low-risk account, always read the contract provided before signing. Fine print can affect your rates, fees and fines.

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