Payment processing for your business can be rejected because you’re considered “high risk”. After helping dozens of businesses navigate this challenge, I’ve put together this comprehensive guide to high risk merchant accounts.
What Is a High Risk Merchant Account?
A high risk merchant account is a special type of payment processing account designed for businesses that traditional banks and payment processors consider risky. These accounts allow “high risk” businesses to accept credit card payments despite having characteristics that might make conventional providers nervous.
When I first started working with businesses in industries like CBD or online gaming, I quickly learned that standard payment solutions simply weren’t an option for them. That’s where high risk merchant accounts come into play.
Why Might Your Business Be Considered High Risk?
Your business might be labeled high risk for several reasons:
- You operate in an industry with heavy regulations (like pharmaceuticals)
- Your business model has high chargeback rates
- You sell products or services with legal gray areas
- You process many international transactions
- You have a subscription-based billing model
- Your personal or business credit history is poor
- You deal with high-ticket transactions
Industries Commonly Classified as High Risk
Some industries almost always fall into the high risk payment processing category:
- Adult entertainment and dating services
- Online gambling and gaming
- CBD and cannabis products (where legal)
- E-cigarettes and vaping supplies
- Travel agencies and vacation packages
- Subscription services
- Pharmaceuticals and nutraceuticals
- Debt collection services
- Firearms and ammunition
- High-ticket electronics or luxury goods
I’ve worked with businesses in each of these sectors, and while the challenges are real, solutions definitely exist.
The Real Cost of High-Risk Payment Processing Solutions
Let’s talk about what you can expect to pay:
Processing Rates
Standard merchant accounts typically charge 1.5% to 3% per transaction. For high risk merchant accounts, these rates jump significantly:
- Processing fees: 3% to 10% per transaction
- Monthly fees: $25 to $100
- Setup fees: $100 to $500
Rolling Reserves
Many high risk merchant account providers will hold back a percentage of your sales as security against potential chargebacks and fraud. This is called a rolling reserve.
- Typical reserve amount: 5% to 10% of monthly volume
- Reserve period: Usually 6 months before release
One client of mine in the subscription box industry had 7% of their monthly sales held in reserve for the first year. While challenging for cash flow, this allowed them to build trust with their processor.
Advantages of High-Risk Merchant Account Services
Despite the higher costs, there are significant benefits:
- Ability to process payments when others say no
- Better fraud protection systems
- Specialized chargeback prevention tools
- Support for global payment processing
- More flexible contract terms than temporary solutions
- Higher processing volume capabilities
- Business stability through consistent payment processing
How to Choose the Best High-Risk Merchant Account Providers
When I help businesses select a provider, I focus on these key factors:
1. Transparent Fee Structure
Look for providers who clearly outline:
- Processing rates
- Monthly fees
- Setup costs
- Reserve requirements
- Contract length and termination conditions
2. Industry Experience
Choose providers who understand your specific industry. A processor experienced with online gaming businesses will better serve you than one that mainly works with retail.
3. Security Features
The best high-risk merchant account providers offer:
- Advanced fraud detection
- Real-time transaction monitoring
- Address verification services (AVS)
- 3D Secure authentication
4. Customer Support
When issues arise (and they will), responsive support becomes crucial. Look for:
- 24/7 availability
- Multiple contact methods
- Dedicated account managers
Steps to Apply for a High-Risk Merchant Account
Ready to apply? Here’s my recommended process:
Gather your business documentation:
- Business license
- Articles of incorporation
- Processing history (if available)
- Bank statements (typically last 3 months)
- Financial statements
Shop around with multiple providers
- Compare rates and contract terms
- Request detailed fee breakdowns
- Ask about reserve requirements
Prepare for underwriting
- Be transparent about your business model
- Highlight fraud prevention measures you’ve implemented
- Explain your chargeback management strategy
Review the contract carefully
- Check for early termination fees
- Understand the reserve structure
- Note any processing limits
Reducing Your Risk Profile
I always tell my clients that they can improve their terms over time by:
- Maintaining low chargeback ratios (under 1% is ideal)
- Building processing history
- Implementing strong fraud prevention
- Clearly communicating policies to customers
- Delivering excellent customer service
One e-cigarette retailer I advised managed to reduce their processing rates by 2% after six months of clean processing history and implementing my recommended fraud prevention strategies.
A high risk merchant account may come with higher fees and stricter terms, but it’s often the only viable solution for businesses in certain industries. By understanding what makes your business high risk and selecting the right provider, you can establish stable payment processing that supports growth.
Remember that your “high risk” designation isn’t permanent. With good business practices and a solid processing history, you can gradually negotiate better terms and lower costs.