What Is A High-Risk Merchant Account

Florence Carpenter

A high-risk merchant account is a type of bank account that allows high-risk businesses to accept electronic payments. Banks and payment processors have their own criteria to determine whether a business is considered high-risk or low-risk. High-risk businesses typically have higher chargeback rates and are more vulnerable to fraud.  

Since not all merchant processors are willing to cope with the increased amount of risk involved, there are some high-risk merchant processors that have specific features to cater to businesses designated as high-risk. 

Signs You May be a High-Risk Merchant 

Some signs that you might need a high-risk merchant account for your business include:

  • Plenty of disputed payments from customers, leading to a high chargeback rate
  • Operating from a home-based location
  • A lack of payment history
  • A low personal credit score 
  • High-volume processing
  • Selling high-ticket items
  • Operating in specific industries (e.g. gambling, eCommerce, travel)

What Are the Consequences of Being a High-Risk Merchant?

If you are classified as a high-risk merchant, you may be limited in terms of the number of monthly transactions or having a cash reserve. It may also be more difficult to apply for a merchant account in the first place.

Usually, you’ll also have to pay higher fees and processing rates to cover the amount of risk involved. However, some benefits may include being able to charge recurring payments for customers, gain access to a higher processing volume, sell to international clients, and have more flexibility to scale your business. 

Since there are plenty of high-risk credit card processors to choose from, it’s important to do your research so that you partner up with a reliable company. Some processors may charge hidden fees, so paying attention to the fine print can save you lots of money down the line.
Read on to learn more about which businesses are most likely to be considered high-risk to check whether you’re on the list.

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