Everything You Need to Know About a High-Risk Merchant Account

June 1, 2020 / Posted in Payment Processing

When it comes to credit card processing, some types of merchants need a specific processor service. This is called a high-risk merchant account. These are accounts that banks consider a high-risk type, like the ones that are prone to chargebacks or the ones that involve selling restricted products. What other businesses fall under this category, and does your enterprise need such a merchant service? Let’s find out.

Let’s Start With the Basics – What Are High-Risk Businesses?

There is no universal definition since credit card processors, banks, and brands have their own lists that can vary to a certain degree. For the most part, there is no such thing as an industry that is flagged in all banks.

Every business needs to have point-of-sale systems (POS) that will let them accept different types of payments. What all high-risk businesses have in common is that they want to process credit card transactions, but they have high chances of facing a chargeback or a refund. Another reason could be that they are not compliant with the security regulations of the country or the state they’re operating in, or that the company belongs to a sector with a high employee turnover rate.

Banks usually qualify them as high-risk types and sometimes decline to underwrite them. Some of the potentially problematic industries that are flagged by processors are:

  • Firearms sellers
  • Online dating websites
  • Adult-themed websites
  • Digital currency exchanges
  • Tobacco and e-cigarettes shops
  • Travel and advanced booking
  • Medications
  • Supplements (e.g. CBD and kratom)
  • Debt collections
  • Loan services
  • Online casinos, online gaming, and casinos
  • Telemarketing
  • Pawnshops

These businesses don’t have to be bad, illegal, or dangerous in any way. Even if they’re perfectly legit individual companies, banks and merchant providers might reject them because of the high chargeback and return percentage. We could say that the primary reason for considering them risky is the reputation of the industry and processing history.

What Is a High-Risk Merchant Account

It’s a type of processing of payments in a business that is prone to getting a chargeback or a refund multiple times. They’ll also probably require paying higher fees for merchant services. Setting up a merchant account as a high-risk firm is a compromise solution that will allow your business to accept credit cards.

Anybody who wants to make sales and profits in their business should accept credit cards as a form of payment. If they don’t, their prospective customers may go elsewhere to buy the product or get the service they want.

Major processors usually avoid giving businesses with a high potential of chargebacks the power to process credit cards because of possible false refunds and frauds, and so do banks. Banks may even put a rolling reserve on your account as a form of protection for them (a part of the card processed sales volume will be held for a defined period of time).

What Business Types Need One

If you run a company that has had many refunds in its processing history, credit card processors might treat you as if you were in the high-risk category even if you’re not in the group of the businesses listed above.

Individual businesses can be considered high-risk for some other factors like poor personal credit, non-payment, fraud, high dollar value transactions with no business history, trading of expensive custom products, or a large number of international transactions.

Offshore accounts are often treated as risky, as well. Offshore means that processing accounts with an acquiring bank are located in a different country than the business itself.

How to Get High-Risk Merchant Accounts Approved?

One of the first reasons to get a merchant account for high-risk businesses is avoiding the termination of your account altogether. The bank might close your account and hold your funds without any notice if you have negative risk factors and performance. If your company is considered a high risk one, you have to know what kind of payment processors you need and which high-risk merchant account providers are willing to provide you with payment processing services and meet your company needs.

Signing a contract with a processor for a high-risk business can take longer than usual, and it always costs more. You may succeed at signing up for a traditional one, and after some time, you might find yourself with a terminated account.

If you get a dedicated high-risk merchant account with instant approval, know that they aren’t instantly available because of the extra steps involved in the underwriting process. Your processor may need to register you with the credit card brands before you can accept plastic.

Crucial Things to Know When Securing Merchant Accounts

There are some essential things when it comes to obtaining merchant accounts. The first is to be honest and upfront about all the details about your company to not have it terminated. As long as you run a legal company, you surely can find a processor that will service you. Another vital part of this process is to learn that there will be restrictions, such as rolling reserves.

When you find a reliable high-risk payment processor, you need to fill out an online application. Risk management experts will decide whether your firm qualifies for a high-risk merchant account, and it will be verified whether it’s on the terminated merchant file list (TMF).

Your preferred high-risk providers should be the ones that have good track records for providing fair quotes and reliable services.

How to Find a Credit Card Processor for High-Risk Accounts

Fortunately, there are credit card processors that want to work with high-risk merchants, and some are even specialized for them. Not only do some companies process their credit card payments, but they can also get accounts set up quickly and minimize the chances of a chargeback. One of the most important steps is to do proper research and find a trustworthy high-risk processor that fits your company’s needs.

The processors that offer accounts for high-risk merchants will typically market themselves as such. Even if you lead a business that has been turned down for high-risk accounts with one processor, you can still secure it with another merchant processing company.


There are many different reasons why some businesses can be considered high-risk. You can have a legal firm and still have problems if the industry you’re in is flagged by some banks. If you’re in the group of high-risk merchants, you need to find a reliable payment processor for credit cards, and the whole process will be uncomplicated and free of stress. This search might take a while and be ready for somewhat higher fees, which are out of your processor’s control and are charged by major brands such as MasterCard and Visa.


It never hurts to know how much you can save.

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