High Risk Merchant Accounts: The Ultimate Guide

High Risk Merchant Accounts: The Ultimate Guide

In this article, you'll learn how to lower your processing rates as well as what types of merchants actually need a high risk merchant account.

We show you all the ways processors try to take advantage of your high risk business and how to get around all of the added fees that are rampant in high risk processing accounts.

High Risk Merchant Account


  1. ​The ability of a high risk business to be able to accept credit cards as a payment option.
  2. A merchant of a business deemed high risk seeking the ability to accept plastic as payment.
  3. A term that certain processing vultures use to charge exorbitant rates and fees to a merchant that wants to accept credit cards.

There are businesses that are higher risk than others, and a merchant processor takes on more risk when offering them a high risk merchant account. Any company dealing with debt collection or debt consolidation will most likely be labeled as "high risk" because of inconsistent income times. Student loans and business loans are great examples because both types of loans can take years to pay off.

That means that there are traditionally more fees and higher rates to offset the higher risk.

Some merchants just want to accept Mastercard, Visa, Discover and American Express as payment options and are surprised to hear that they’re considered a high risk business. (View our list of high risk merchants here.)

There is an abundance of business types that need a high risk merchant account in order to process credit and debit card transactions, and in this article we’re going to dive into why that’s true for each business type.

high risk merchant account

And then the last definition, the one we all wish weren't true but unfortunately it's rampant throughout the processing world. Certain credit card payment processing companies use the “high risk” tag to gouge unsuspecting business owners out of more of their hard earned profits.

To make sure you’re never subject to this unfortunate third definition of the term, we’re going to lay out exactly how to find out if you’re being lied to, and how to pick a high risk merchant account that works for you.
high risk processing

If you have a business that requires eCommerce payments, debit and credit cards online are just about the only way that you’re going to be able to accept online payment from customers.

While Paypal and Square are great processing solutions for small businesses, they aren’t the right fit for a more established business.

Once your business grows, it will be time to move on from the Square and Paypal processing option and adopt a more traditional high risk merchant account with a payment gateway.

Moving from the world of the small business to that of a medium or large business means understanding all of the details and terms that surround merchant accounts.

Usually the larger the business and the more they process, the lower the processing rates and the more generous the terms they’re offered.

It would be lovely if all highrisk credit card processors treated each business the same, but sadly that’s just not the reality in today’s marketplace. Extending a line of credit isn’t quite as simple as it used to be. Processing credit cards has grown in complexity in recent years.

Every business that applies for a merchant account is assessed for the level of risk that their business experiences. The risk level has a dramatic effect on the processing rate that is offered to the business, and is usually centered around the amount of chargebacks that business receives offset by the volume merchants process each month. Chargeback prevention can go a long way towards helping you keep your chargeback ratio much lower.
high risk business

If your business is determined to be a high risk business, it makes it more difficult to secure a traditional merchant account.

Many processors will simply refuse to work with you while others will increase their processing rates significantly if they offer you an account.

We’re going to detail all of the reasons why your business might be labeled high risk and what you can do to secure a merchant account that fits your business.

PCI compliance (Payment Card Industry Compliance) must also remain front of mind when looking for highrisk merchant accounts.

Click Here to Find out if your business qualifies for a Shift Processing High Risk Merchant Account.

Reasons why your business might need a high risk merchant account

  • High Rate of Chargeback- If your business experiences chargebacks quite frequently, this is a red flag for merchant account providers. While this metric isn’t usually indicative of your company, it does tell the processor about the patterns of your clientele. If your clients have a history of chargebacks, then your business is most likely going to be considered high risk because it will require greater chargeback protection. Most low risk businesses have zero chargebacks per month.
  • High Rate of Fraud- If it's common to see quite a few fraud transactions processed by your business each month, this is yet another way your business might be deemed high risk. Using only a virtual terminal and processing only card not present transactions in many cases will lead to the necessity of a high risk account.
  • Selling goods that walk the line of legality -If your business is selling goods that could be associated with illegal activity, you’re most likely going to need highrisk merchant account providers to process payments. If you sell Items like marijuana paraphernalia or elements from the pornographic industry, a high risk merchant account is potentially your only option to accept credit cards.
  • Offshore Businesses - If your business is located overseas but operates here in the United States, this is a huge red flag for the underwriters of merchant accounts. Without the ability to see and know all of the inner workings of your company, there’s really no way to be sure that offshore merchants are completely legitimate and trustworthy. That’s enough to push offshore merchant accounts towards the high risk label.
  • Guilty by Association - If your business is commonly associated with the type of business that’s seen as a pyramid scheme or another type of a scam, high risk merchant accounts are probably your only option.
  • Merchants with Bad Credit - One of the determining factors for authorizing any merchant account is the credit score of the business owner. If your credit score is rated as bad credit, that reflects on how risky it is to authorize your business for a merchant account. If your credit score is really bad, even a high risk account may not be an option until you’re able to raise your score to a healthy level. While it's not impossible to get an account with a payment processor with poor credit, it can prove more difficult.
  • High Average Ticket - If your business has a very high average ticket, you might need a high risk merchant account. If you think about a convenience store with an average ticket of $7, it would take many chargebacks to equal the same dollar amount of a single chargeback for an electronics store. If your average ticket is very high, this alone might push your business into the high risk category.

Types of High Risk Merchants

High risk credit card processing accounts can be found in many types of businesses. There are some businesses that are almost always considered high risk business types. Knowing if your business type is in this list can help you negotiate your new merchant account by knowing how the processor is going to see your business through their eyes.

High Risk Merchant List (Click to Reveal)

Processing Fees for High Risk Merchant accounts

Merchant accounts for high risk businesses usually cost quite a bit more than a traditional merchant account. In many cases, it can be 3-10 times more depending on how risky your venture is evaluated to be.

For almost any merchant account, highrisk credit card processing providers do all that they can to lock their merchants into long term contracts. In the high risk processing arena, contract terms are usually much harder to negotiate.
high risk merchant processing

If you’re finding that the only options for your business are 3 year term contracts, you’ll be glad to know that the industry is trending towards month to month contracts.

If you’re being pitched a 3 year or longer contract for your high risk merchant account, it’s time to look for another provider that offers month to month contracts.

It’s unfortunate that most highrisk merchants don’t have much in the way of bargaining strength, but don’t sign on to a contract that doesn’t feel right or locks you in for the long term.

These long term accounts usually have a hefty penalty for exiting the contract, and it would be unfortunate to find a better provider just a few months down the road and be locked in for many years to come.

Also be on the lookout for a liquidated damages clause in the contract that you’re presented. These have the ability to raise your early exit fees as you proceed with your contract.

Most high risk merchant accounts will have fees that are double and triple that of a traditional business. There are many options for a traditional merchant account without any kind of a monthly fees, but it’s harder to come by in a high risk account.

high risk processing fees

Another fee to watch out for is what’s called a rolling reserve. This is a reserve that is placed on the money within your account to account for the chargebacks that are expected each month.

Instead of giving you all of the proceeds from your sales, a percentage is held back to pay for these chargebacks each month. Not every high risk merchant account has a rolling reserve, but many do to protect the processor and the merchant. If you sign with a high risk merchant account, you can expect to pay into a rolling reserve to protect the processor and your business.

Since your processor is taking on additional risk by offering you a merchant account, the interchange fees charged often reflect this added risk to accept Visa, Mastercard, Discover and American Express.

You should be able to find a processor that offers you less than 3x the rates of a traditional merchant account. If you aren’t finding that rate for your type of business, it might be time to look around and find a better high risk merchant processor.
high risk credit card processing

Before you sign any contract, we always suggest that you read the contract in full before you sign. Every merchant account contract will show you what that particular processor is all about in their contract terms.

If you’re reading your contract and find it impossible to understand, there’s probably a reason for that and you should consider another payment processor. You shouldn’t have to risk payment processing rates to find a reputable merchant services provider.

Click Here to Find out if your business qualifies for a Shift Processing High Risk Merchant Account.

How to Choose Your High Risk merchant account

High approval rating for submitted accounts

Find a processor that has a great track record in getting accounts approved for a highrisk business.

A processing company can promise you the best terms in the world, but if they can’t get the account approved, you’re just wasting your time.

There are a few high risk merchant account providers who have a 99% and higher success percentage in authorizing a new merchant account.

These are the payment processing companies you’re looking for.

No hidden fees

The payment processing industry is full of companies that think the best way to do business is to hide fees in their contracts.

While this used to be an industry leading practice, thankfully the industry is changing.

Please always read through your contract before signing anything as this is the primary place that hidden fees can be found.

You want a company that is upfront and honest with you about the fees that they will be taking out of each transaction.

If they can’t be honest and upfront with you about that, do you really want them handling all of the money for your business?

Your top picks for potentially becoming your processing partner shouldn’t have any hidden fees.

Month to month contracts

Multi-year contracts can be great for other accounts, but they’re not fantastic for highrisk merchants processing credit cards.

They can be great for the processor, but they’re rarely great for the merchant.

Find a processing company that offers month to month contracts on their highrisk accounts.

Minimal rolling reserve

Let’s call this what it is. A rolling reserve is a layer of protection for the processor that any chargebacks will be repaid without them having to dip into their proceeds to cover any losses.

If your account doesn’t have any regular chargeback history, there’s not really a good reason to have a minimal rolling reserve.

If you do have a processing history of chargebacks, then it’s probably a good thing to set aside a percentage of your proceeds to help offset that.

No early exit penalty

Remember that what you’re looking for in a contract is a month to month contract with no termination fee.

You should be processing with a company that wants to keep you processing with them because you want to be there.

Signing a 3 or 5 year contract for a merchant account is like handcuffing your business to a processor voluntarily.

No matter what you do, you’re always going to be tied together unless you break the contract or finish your team.

Wouldn’t you rather voluntarily hold hands with your processor than be handcuffed to them?

Zero fee compatibility

In Europe there’s a program that allows you as the business owner to pass the processing fee back to the consumer.

It’s called Zero Fee Processing, and it’s growing in popularity here in the US.

It’s more difficult to get a zero fee account as a high risk merchant, but it’s not impossible.

As the cash back percentages for business credit cards continue to rise and the cost of accepting credit cards climbs higher and higher, it might be time to give your customers a choice on how to pay.

If you’re interested in a zero fee merchant account, make sure the processor you choose is compatible with this new system.

Cash discount program ready

Similar to zero fee processing, a cash discount program allows you as the merchant to raise your prices to include the processing fee in every price in the store while giving a 4% discount to anyone who pays with cash.

This is another way to completely eliminate your processing fees as a merchant.

If you’re considering a merchant cash discount program, make sure the merchant account you’re applying for is compatible.

Reasonable fee structure

Before you sign even a month to month agreement with a merchant processor, you should clearly understand the fee structure that you’re signing on to.

Make sure you’ve highlighted the contract and discussed any portion of the contract that is confusing or unclear to you.

If you find any hidden credit card processing fees, be sure to negotiate them out of the contract before you sign.

Your business could end up paying fees through a payment structure called interchangeplus pricing, where the merchant is charged the regular interchange fee, plus a mark up fee.

The application process can be complex, but the right processing partner should make it easy for you to understand exactly what you’re signing up for.

Be certain to discuss debit card and credit card processing rates as they are different, and processing debit cards can be a significant portion of what your customers use for payment.

You should be able to find a high risk merchant account that charges between 2-4x a traditional host merchant account depending on how risky your industry might be.

There are domestic options for almost every merchant instead of taking your processing overseas for higher rates.

Ways to Accept Pa​​​​yments

Like restaurant POS systems, your high risk retail POS software will accept all major credit cards. Some POS systems will even offer some sort of system that can turn a mobile device into a payment processor. IPad POS, for example, would have an accessory and an app to turn an IPad into a payment processor and give you your own terminal merchant.

Click Here to Find out if your business qualifies for a Shift Processing High Risk Merchant Account.

Leave a Comment:

Tyson Adolfson says February 18, 2019

Hi there,

I need a credit card payment processor capable of servicing my customers credit card payments.
currently I have had issues with every single credit card payment processor I’ve tried using – saying they don’t support my tonic store because health teas to them is considered risky – even though tonic herbs are so safe you can use them everyday in large quantities and it will only reinforce health as there is absolutely 0% toxicity to tonic herbs and superfoods – so I don’t see why that would be considered risky to them.

I have three businesses whom want to order from me but – it’s hard to find a payment processor who will support my health store in regards to processing credit card payments.

Can we set up an account quickly with you?
hope to hear back shortly

Kind regards

    Shift Processing says February 20, 2019

    Hello Tyson,
    Thank you for reaching out to us. We’ll be sure to have a representative reach back out to you shortly!

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