Progressive Payment Solutions

What is a High Risk Merchant Account?

What is a High Risk Merchant Account?

Find out everything you need to know about high risk merchant accounts: what they are, what their benefits and drawbacks entail, and how you can change your high risk status to lower your payment processing fees. 

Finding out your business is seen as high risk might sound scary, but it’s more common than you think. In fact, you likely have had dealings with high risk merchants in the past week.

Let’s take a look at what a high risk merchant is, the advantages and disadvantages that high risk merchant accounts offer, and if there’s anything you can do to save your business money on processing fees.

Defined: a high risk merchant

Let’s start with the simple part and go from there: a high risk merchant is basically one that is deemed more prone to chargebacks or fraud. This may be due to the nature of their work, their unique vertical, or other factors. 

Some of the most common high-risk industries include:

  • Online gambling
  • Adult material
  • Credit Repair Services
  • Travel
  • Nutraceuticals
  • CBD, Vape shops
  • Phone services
  • Multi-level marketing and direct sales
  • Software downloads
  • Health and wellness products

However, there are other businesses that may be labeled high-risk merchants simply because of how they do business or their current circumstances:

  • They are a new merchant that hasn’t yet processed any payments. When there’s no record to go on, there’s always more risk involved.
  • They have a low credit score. 
  • They are seen as high risk because they are working out of their home and not a brick and mortar location. They are seen as less legitimate and are likely to be more difficult to contact if there are payment issues. 
  • They do a lot of business internationally, and are thus labeled as more of a risk since there aren’t the same laws and protections surrounding payment transactions in other countries.
  • They have a high volume of transactions, or the average transaction is high. For example, if they process above $20,000 in payments per month, there is a good chance that at least some of those transactions may be charged back or fraudulent. Or if their average transaction is above $500, then there is a lot of risk involved should there be a problem with only a few of those payments.

Those who are processing transactions from high risk businesses can suffer reputational harm from frequent payment issues, thus there’s a higher risk involved in processing their transactions. This leads to these businesses requiring special attention, oversight, and full underwriting from processors. 

This, in turn, leads to higher processing fees in comparison to other industries. These higher fees are to help compensate the processor for the greater amount of work involved in processing payments with these businesses.

Benefits and drawbacks of high risk merchant accounts

High risk merchant account benefits

Despite their initial negative impression, many might be surprised to learn that there are actually a number of advantages to having a high risk merchant account. Let’s take a look at the most common benefits:

Increased payment opportunities

Low risk accounts are typically only allowed to accept certain types of payments by credit card. This isn’t the case with high risk merchant accounts; rather, they offer other options like recurring payments. They also can accommodate higher sales volumes for moments like special sales or product launches.

Expanded payment opportunities

Having a high risk merchant account also lets the merchant accept payments from all over the world. This contrasts with the restrictions placed on typical merchant accounts that usually only accommodate payments from a handful of countries.

Drawbacks of a high risk merchant account

It’s important to note the potentially serious drawbacks of high risk merchant accounts. These are some of the most common ones:

Higher fees

As mentioned earlier, higher risk means higher fees involved. Thus, these merchants will be paying more each month in payment processing fees–sometimes even double those of low risk merchants. The merchant may also be subject to the payment processor holding a certain percent of their income until the transaction has been verified, which is known as a rolling reserve.

Along with higher processing fees come higher chargeback fees in the case of a customer disputing a transaction on their credit card with a high risk merchant. 

Longer wait time

Because there is more manual oversight in comparison to a normal merchant account, it also takes longer to be both approved by a payment processor and a longer wait time for the money to clear and get transferred into their bank account.

How much does a high risk merchant account cost?

Not surprisingly, there is no flat-fee that high risk merchants are charged. Rather, each processor charges a different rate. Merchants need to shop around between different processors to find the best rate for their business.

However, before a contract gets signed, it’s important to look at what to avoid in a credit card processing contract to save both money and hassle from some processors who are eager to take advantage of merchants.

How do I get a high risk merchant account?

Because processing payments from these merchants is seen as risky, the best thing to do when applying for an account is to highlight why the business should be trusted. These details can be included on a cover letter that accompanies the application.

For example, are there industry experts involved in the business? Does the business have something unique about it that will make it less susceptible to fraudulent transactions? Can they give a sound reason for high trading volumes or high average transaction amounts? Mentioning any factors like these can increase the merchant’s approval rate.

Can I transition to a low risk merchant account?

Just because your business is seen as high risk doesn’t mean you’ll always be high risk. That’s because the reasons behind being labeled high risk are not permanent.

As mentioned earlier, some contributing factors to being labeled as high risk include a lack of history in accepting payments or a low credit score–both of which can quickly or drastically change over time. So if you can improve either or both of these indicators, it’s likely that you can be seen as low risk in the future.


High risk merchant accounts are for businesses that are seen as potentially having a lot of fraud or chargebacks related to accepting credit card payments. These merchants pay more for processing due to the higher amount of work involved in making sure their payment transactions are approved. 

However, there are some advantages to high risk merchant accounts. And just because a business was once labeled high risk doesn’t mean it will always be that way.

Progressive Payment Solutions regularly works with high risk merchants to offer the best rates in the industry. Want to know how much you’ll save on processing with us? Then contact us today and start saving money.

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