Providers consider specific businesses — such as airlines and investment firms — riskier than others. If you get categorized as a high-risk business, you’ll run into problems when applying for merchant accounts. Look for a provider that specializes in high-risk merchant accounts, but watch out for the fees.
What is a high-risk merchant account?
A high-risk merchant account is a specific type of bank account for businesses that don’t qualify for traditional processing. This account lets you accept credit and debit cards and temporarily holds the money in your merchant account. The funds are then deposited into your business bank account.
You’ll undergo an underwriting process to get one, and the financial institution determines your level of risk. For example, they’ll look at your credit and banking history, processing history, sales method and what industry your business is in. If you’re approved for a high-risk merchant account, expect slightly higher fees and stricter terms and conditions than regular merchant accounts.
High-risk vs. traditional merchant accounts
Businesses typically get traditional merchant accounts, unless they meet at least one of the high-risk business criteria. Most providers have the following benchmarks:
Monthly chargeback rate
Less than 1%
1% or higher
Based in the US
Outside the US
Business industry examples
Clothing retail, medical supplies, food service, etc.
Adult entertainment, casino, cannabis, etc.
Main product offering
Books, home goods, skincare products, etc.
Seasonal items, digital products, tickets, etc.
Offer recurring payments or subscriptions
Average monthly sales volume
less than $20,000
Average credit card transaction
less than $500
Good to excellent
What is considered a high-risk business?
Being labeled a high-risk business means banks take on more risk by processing your credit card payments. For example, banks might consider you high-risk if you have:
High chargebacks. Banks lose money when they return funds based on a credit card holder’s dispute. You’re a riskier investment if your business or your industry has a history of high chargebacks.
High sales volume. The more transactions you have, the higher the probability of fraud and returns.
Automated billing. Recurring payments or subscriptions generally have more disputes because customers might not remember that they signed up.
High ticket sales. Consumers are more likely to dispute a transaction when an item or service is more expensive.
Poor industry reputation. Specific industries, such as pharmaceuticals and bail bonds, generally have higher rates of dissatisfaction, which increases the risk of financial failure.
A Terminated Merchant File, also known as MATCH, is a blacklist of businesses that banks have terminated for breaching their standards for credit acceptance. Although Mastercard created and maintains this database, banks use this list to screen applicants for a new merchant account.
Businesses on this list, who have had their merchant account revoked, are considered risky and will likely have a hard time applying for a new account. A few reasons a merchant may be placed on the TMF or MATCH list include:
Account data compromised. Account data was stolen and used at other merchants.
Excessive chargebacks. Your chargebacks exceeded the set threshold in your contract.
Fraud conviction. One business owner was convicted of fraud.
Bankruptcy. Your business failed to make payments and filed for bankruptcy.
PCI Noncompliance. Your business failed to comply with the Payment Card Industry Data Security Standards.
Do I need a high-risk merchant account?
Similar to applying for a loan, each provider has a different set of standards and underwriting process for evaluating your risk. But you’ll likely need a high-risk merchant account if your business is in a high-risk industry and you want to accept credit cards.
How to choose a high-risk merchant account provider
While it’s more difficult to get a high-risk merchant account than a traditional account, it’s not impossible. Here’s what you should consider when choosing a provider and how to avoid the predatory providers that could charge you an arm and a leg for their services:
Look for a provider that accepts your industry. Several providers only accept specific industries for high-risk merchants. You’ll need a credit card payment processor that specializes in your type of business.
Consider costs and fees. Don’t focus solely on the provider’s processing fee. Comb through the contract so you have a good idea of where a provider might nickel and dime you, including miscellaneous or administrative fees.
Consider security. Your provider should also help you manage fraud and chargebacks and protect your customers’ data.
Customer support. Since your account provider connects you with your money, be sure they can assist you when you need it. Consider how easy it is to get in touch with customer service and how helpful they are.
Reputation. Research what other businesses say about the company.
You’ll likely pay one-time setup fees and then see monthly charges for your account. Here are a few common costs associated with a high-risk merchant account:
Setup fees. The cost of onboarding you and setting up your high-risk merchant account.
Processing fee. This charge is for each transaction you process.
Refund fee. Some payment processors charge a fee when you process a refund.
Chargeback fee. When customers dispute a charge, you’ll pay the customer’s refund and the account provider’s chargeback fee. You can still fight the customer’s dispute, but you probably won’t get refunded the chargeback fee.
Rolling reserve. Each credit card deposit is held on reserve for a period of time and released on a continuous basis. Think of it as a security deposit for your provider that the acquiring bank uses in case of a chargeback.
Do I need a business checking account?
Yes, in most cases you’ll need both a business checking account and a merchant account.
A business checking account helps keep income and expenses separate from your personal finances and helps you build a credit history for your business, which is critical if you ever want a business loan.
A merchant account operates differently than a checking account. This account allows you to accept credit card payments online and acts as the middleman between your customers and your business bank account.
Do I also need a payment processor?
Some providers bundle services and supply the payment gateway, payment processor and merchant account all in one. You’ll need to find out if your merchant account comes with a payment processor. Here’s how they are all connected:
A customer uses a credit card.
The payment gateway authorizes the transaction.
The payment processor receives the request and processes the payment.
Since high-risk merchant accounts require an underwriting process, providers may claim to offer “instant approval,” but the fine print defines the approval period as one to two business days. At that time, you may only receive initial approval, but you’ll likely be locked in a contract with hefty early termination fees. And if the underwriting process ends up rejecting your application, your account might be frozen and your money withheld.
Acquiring banks may look at the business owner when underwriting your application. Bad credit can place your business in the high-risk category.
Most merchants find out that they’re on the list after being rejected for a new merchant account. Mastercard currently does not formally notify merchants if they’re put on the MATCH list.
Kimberly Ellis is a writer at Finder. She hails from New York City with a BA from Queens College and a New York State teaching certificate. After teaching in both public and private schools, Kimberly decided to take the world by storm and dive into the media industry — where she covers everything from home loans and investing to K–12 education and shopping. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick.
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