Running a business comes with many challenges, but for some industries accepting credit card payments adds an extra layer of complexity. These businesses often require a High Risk Merchant Account a specialized account designed for companies that operate in sectors considered “high risk” by banks and payment processors.
Industries such as travel, gambling, CBD, digital products, subscription services, and certain financial services are often flagged as high risk due to factors like higher chargeback rates, regulatory requirements, or fraudulent activity.
Having a high risk merchant account allows these businesses to accept payments safely, minimize potential losses, and maintain access to essential payment processing services. In this guide, we’ll explore what high risk merchant accounts are, why businesses are classified as high risk, associated fees and tips for managing these accounts effectively.
By the end, you’ll understand how to navigate the high risk payment landscape and choose the right account for your business.
What Is a High Risk Merchant Account?
A High Risk Merchant Account is a type of business bank account designed specifically for companies that operate in industries deemed high risk by banks and payment processors. Unlike standard merchant accounts, which are easier to obtain and have lower fees, high risk accounts come with additional security measures, higher processing fees and stricter contractual terms.
These accounts enable businesses to accept credit card payments safely, even if their industry has a higher likelihood of chargebacks fraud, or regulatory scrutiny. Essentially, a high risk merchant account bridges the gap between risky industries and the financial institutions that might otherwise avoid them.
Difference Between High Risk and Low Risk Merchant Accounts
| Feature | Low Risk Account | High Risk Account |
| Industries | Retail, Restaurants, Services | Travel, Gaming, CBD, Digital Products, Subscriptions |
| Approval | Easy, quick | Strict, detailed review required |
| Fees | Lower | Higher (processing + monthly + reserve fees) |
| Chargeback Protection | Standard | Enhanced, sometimes with rolling reserves |
| Contract Terms | Flexible | Often long-term with strict conditions |
Having a high risk merchant account is crucial for business survival in industries where traditional banks may refuse services, ensuring continued payment processing and financial stability.
Why Some Businesses Are Considered High Risk
Not all businesses face the same challenges when it comes to credit card processing. Some industries are labeled high risk due to factors that increase the likelihood of financial loss, fraud, or regulatory issues. Understanding why a business might fall into this category helps you prepare and manage your merchant account more effectively.
1. High Chargeback Rates
Industries with frequent customer disputes or refunds are considered high risk. Payment processors fear losing money if a customer initiates a chargeback which is why businesses in these sectors often pay higher fees.
2. Industry Type
Certain sectors are naturally high risk due to the nature of their products or services, including:
- Travel agencies and airlines – customers may cancel trips or disputes may arise.
- Online gaming and gambling – higher potential for fraud.
- CBD and hemp products – legal regulations vary by location.
- Subscription services and digital products – recurring billing increases chargeback risk.
- Financial services and cryptocurrency platforms – heavily regulated with potential for fraud.
3. Regulatory Compliance
Businesses operating under strict legal or regulatory frameworks may be flagged as high risk. For example, selling age-restricted products or handling sensitive financial data requires adherence to specific laws and standards, increasing perceived risk.
4. International Transactions
Businesses that frequently process payments from overseas customers may face higher fraud rates and currency exchange risks, which can lead to high risk classification.
5. Startups or Poor Credit History
New businesses without established processing history or those with low credit scores may be considered high risk, as processors cannot accurately predict their reliability.
Being classified as high risk doesn’t mean your business is unsafe it simply means that extra precautions are needed to protect both the processor and the merchant. With the right high risk merchant account, you can accept payments securely while managing potential risks effectively.
Features of High Risk Merchant Accounts
High risk merchant accounts come with specific features and safeguards designed to protect both the business and the payment processor. Understanding these characteristics is essential for anyone operating in a high-risk industry.
1. Higher Processing Fees
Since high-risk businesses are more likely to experience chargebacks or fraud, processors charge higher transaction fees to offset potential losses. Fees can range from 2% to 5% per transaction, depending on the industry and provider.
2. Rolling Reserves
Many high risk accounts require a rolling reserve a percentage of your sales held by the processor for a set period (usually 3–6 months). This acts as a buffer against chargebacks or disputes.
3. Stricter Contract Terms
High risk merchant accounts often come with longer contracts and early termination fees. Processors want assurance that the merchant will maintain compliance and reduce risky behavior.
4. Enhanced Security Measures
High risk accounts typically require advanced fraud protection, including:
- Address Verification Service (AVS)
- CVV verification
- PCI compliance audits
- Chargeback mitigation tools
5. Faster Payment Reviews
Some transactions may be subject to manual review to prevent fraud or detect suspicious activity, ensuring the safety of both the merchant and the processor.
6. Specialized Support
Processors offering high risk accounts often provide dedicated support teams familiar with the unique challenges of high-risk industries, helping merchants navigate compliance, chargebacks, and account management.
While high risk merchant accounts may have higher fees and stricter terms, they provide critical access to payment processing, allowing businesses in risky industries to operate smoothly and securely.
High Risk Merchant Account Processing Fees
Running a high risk merchant account comes with additional costs compared to standard merchant accounts. Understanding these fees helps business owners plan their budget and choose the best provider.
1. Transaction Fees
- Every payment processed incurs a transaction fee, usually higher than normal merchant accounts.
- Typically ranges from 2% to 5% per transaction.
- Varies based on card type, transaction method (online or in-person), and processor.
2. Monthly or Annual Fees
- High risk accounts often have monthly maintenance fees to cover account monitoring, fraud protection, and customer support.
- Average monthly fees: $20–$50, but can be higher for very high-risk industries.
3. Rolling Reserves
- Many high risk accounts require a rolling reserve, a percentage of your daily or weekly sales held by the processor.
- Usually 5%–15% of sales.
- Held for a period (often 3–6 months) to cover potential chargebacks or disputes.
4. Chargeback Fees
High risk industries often experience more chargebacks, and each one can incur a fee:
- Typically $20–$100 per chargeback.
- Some processors offer chargeback protection programs for an additional cost.
5. Setup or Application Fees
Opening a high risk merchant account may include:
- Application fee: $50–$200
- Account setup fee: Varies depending on the provider and industry
While these fees may seem high, they are designed to protect both the business and the processor. Knowing the breakdown allows you to budget effectively and select the right account for your industry.
How to Get a High Risk Merchant Account
Obtaining a high risk merchant account requires careful preparation since banks and payment processors are more cautious about approving high-risk businesses. Here’s a step-by-step guide to help you secure an account successfully:
1. Assess Your Business Risk Level
Before applying, identify why your business might be considered high risk. Common factors include:
- Industry type (e.g., travel, gaming, CBD, digital products)
- High chargeback rates
- Regulatory or compliance requirements
- International transactions
Understanding your risk profile helps you choose the right processor and prepare the necessary documentation.
2. Gather Required Documentation
High risk processors require more detailed information than standard accounts. Typically, you’ll need:
- Business license and registration documents
- Bank account information
- Financial statements or processing history
- Website information and refund/return policies
- Merchant references (if applicable)
3. Choose a Specialized Payment Processor
Not all processors accept high-risk merchants. Look for providers that specialize in high risk accounts and offer:
- Transparent fee structures
- Rolling reserves with clear terms
- Fraud protection and PCI compliance tools
- Dedicated customer support
4. Submit Your Application
Fill out the application carefully and provide all requested documents. Missing information can delay approval or result in rejection.
5. Review Contract Terms
High risk accounts often have strict contract terms, including rolling reserves, early termination fees, and monthly minimums. Review all details carefully and ask questions before signing.
6. Implement Risk Management Practices
To maintain your account and lower costs:
- Reduce chargebacks with clear refund policies
- Use fraud prevention tools
- Ensure PCI compliance
- Monitor transactions regularly
Approval may take longer than a standard account, but choosing the right processor and preparing proper documentation significantly increases your chances of success.
Tips for Managing a High Risk Merchant Account
Managing a high risk merchant account effectively is crucial to protect your business, reduce fees, and maintain a healthy relationship with your payment processor. Here are practical tips every high risk merchant should follow:
1. Minimize Chargebacks
- Chargebacks are a major concern for high risk accounts. Reduce them by:
- Clearly stating your refund and cancellation policies
- Providing detailed receipts and invoices
- Communicating promptly with customers to resolve disputes
2. Ensure PCI Compliance
High risk accounts require strict adherence to Payment Card Industry (PCI) standards. Compliance protects customer data and prevents fraud, helping you avoid fines and account termination.
3. Monitor Transactions Regularly
Keep an eye on daily transactions to spot suspicious activity early. Early detection of potential fraud reduces losses and keeps your processor confident in your account management.
4. Work With a Specialized Processor
Choose a payment processor experienced with high risk industries. They provide:
- Tools for fraud prevention
- Chargeback management support
- Flexible rolling reserve policies
5. Maintain Good Communication With Your Processor
Stay in contact with your payment provider. Inform them about changes in your business, seasonal spikes, or new products. Transparency builds trust and reduces the chance of sudden account holds or terminations.
6. Optimize Your Payment Methods
Offering multiple payment options, including credit/debit cards, e-wallets, and alternative payments, can improve approval rates and reduce reliance on high-risk transactions.
Managing a high risk merchant account isn’t just about following rules it’s about proactive strategies to minimize risk, reduce fees, and maintain smooth operations.
FAQ – Common Questions About High Risk Merchant Accounts
1. What is a high risk merchant account?
A high risk merchant account is a type of business bank account designed for companies in industries considered “high risk” due to factors like chargebacks, fraud potential, or regulatory requirements. It allows these businesses to accept credit card payments securely.
2. Which industries are considered high risk?
Industries commonly classified as high risk include:
- Travel agencies and airlines
- Online gaming and gambling
- CBD and hemp products
- Digital products and subscriptions
- Financial services and cryptocurrency platforms
3. Why are high risk merchant accounts more expensive?
High risk accounts have higher fees to offset the increased risk of chargebacks and fraud. Fees include higher transaction costs, monthly maintenance, rolling reserves, and potential chargeback fees.
4. What is a rolling reserve?
A rolling reserve is a percentage of your sales held by the processor for a specific period (usually 3–6 months). It protects the processor against chargebacks and disputes while still allowing the merchant to access funds over time.
5. Can any business get a high risk merchant account?
Most businesses can qualify, but approval depends on:
- Industry type and perceived risk
- Business history and processing experience
- Proper documentation and compliance with PCI standards
6. How can I reduce my fees on a high risk merchant account?
To lower fees:
- Minimize chargebacks with clear policies
- Choose the right processor with transparent pricing
- Maintain PCI compliance
- Negotiate fees based on transaction volume and risk profile
7. How long does it take to get approved for a high risk merchant account?
Approval times vary but usually take 1–4 weeks. The process is longer than standard accounts because of the detailed review and risk assessment required.
Understanding these FAQs helps high risk merchants navigate the process confidently, avoid unnecessary fees, and maintain a secure, profitable payment processing system.
