Credit Card Processing for “High Risk” Merchants


In this day and age accepting credit cards as a form of payment for your business is an absolute must. For the average retail business it is as easy as calling a merchant bank and requesting a best high risk merchant services merchant account. However, some businesses are classified as “High Risk” by processing institutions and are much more difficult to get a merchant account for and are typically more expensive.

A high risk merchant is any merchant that has very poor credit and/or owns a business that operates in an industry that is known for having higher than average charge-backs and a higher chance of transactions being fraudulent. A few good examples of businesses that would be considered “High Risk” are as follows.

Online Gambling Institutions

Adult Services


Nutraceutical Suppliers (Supplements)

Travel Agencies

Subscription Based Businesses

Most merchant banks advertising that they specialize in High Risk merchant placement do so simply because there is a higher profit margin to be made on processing rates. The higher the risk a business poses to a merchant bank the more money the bank will want to make before agreeing to processing payments on behalf of the business. It is not uncommon to see rates in excess of 5% with high monthly fees.

The reason that processing banks are hard on businesses that are considered high risk is simple. If a business fails to meet its obligation to provide its customers with a service or if a business goes bankrupt and a customer demands their funds be returned to them then the merchant bank is obligated to refund the customer out of their own pocket. All of the risks associated with processing payments is absorbed by the bank itself and the bank wants to be compensated accordingly.

Q: So what options does a High Risk business have?

A: A business owner always has the option of not accepting credit cards as a form of payment. Unfortunately, as stated earlier in this article accepting credit cards as a form of payment is a must in order for business to flourish. If you do not have the ability to accept a credit card a customer is likely to just go to one of your competitors. A more feasible option is to choose a merchant bank that is smaller than a national chain bank simply because their overhead is typically lower and are they are willing to accept higher risks with smaller royalties than larger banks.

Q: What are the possible side effects of processing with a High Risk account?

A: Most merchant banks reserve the right to shut down your account whenever they feel like it. This poses a huge problem for a business, especially if down time results in the loss of a sales. The best way to combat this issue is to build a relationship with your bank representative and explain your business in as much detail as possible before your account is even opened. There is no sense in wasting time opening an account if it will just be closed a week later because of a piece of information that was not disclosed from the start. Another possible side effect / option is using a bank that is willing to process payments on behalf of a business with a reserve. For example, a bank may require a 10% reserve (meaning they will hold 10% of your sales volume) every month for six months. The bank will then start releasing the funds after the sixth month. This is known as a “Rolling Reserve”. It insures that the bank is safe if a customer decides they want a refund and the business cannot fulfill the request.

Q: Is there anything else I should know?

A: Some industries are completely restricted from being able to accept credit card payments by just about every bank in the united states. Most of these businesses are on the cusp of being classified as Illegal or are currently considered controversial. A good example would be a Medial Marijuana dispensary. Most importantly be sure to always do your homework before deciding who to sign an agreement with. Make sure the rates you are given are competitive in the industry for your business type and watch out for long-term contracts with big cancellation fees!

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