Understanding High-Risk Merchant Accounts: Is Your Business a Candidate?

The growing prevalence of digital payments has led to countless businesses seeking affordable and efficient payment processing solutions. However, payment service providers don’t view all businesses equally. Certain industries have heightened risks of fraud or chargebacks, making it difficult for businesses in these sectors to secure the right payment processor.

If your business falls into the “high-risk” category, finding the right payment processor may be a challenge.

But who decides if a business is high-risk? What factors determine the risk? This article will help you comprehend these aspects and more, preparing you to identify the right payment processing partner for your needs.

Defining High-Risk Merchant Accounts: High-risk businesses require a high-risk merchant account to accept debit and credit card payments. There’s no central authority or framework in the payment industry determining a business’s risk factors. Each bank and payment processor has its own set of standards.

What Factors Label a Merchant as High-Risk? Certain industries inherently carry higher risks and are automatically flagged as high-risk businesses. These include CBD (Cannabidiol), e-cigarettes, vape products, stun guns, tasers, credit repair, multilevel marketing (MLM), adult products/services, pawnshops, supplements, nutraceuticals, tech support, and search engine optimization (SEO) services.

Additionally, other factors can contribute to a business being labeled as “high-risk”:

  • New businesses without prior payment processing experience
  • Poor credit records or low credit scores
  • Inclusion on the MATCH list by a previous processor
  • Controversial product lines or legally ambiguous operations
  • Heavy reliance on international sales due to unpredictable economic dynamics
  • Highly regulated industries

How Do High-Risk Accounts Differ from Regular Accounts?

Being labeled as high-risk can be intimidating. A processor may decline your application, or they may attempt to offset your business risk through specific measures. These measures differentiate high-risk and regular merchant accounts:

  1. Longer application process: Applying for a high-risk merchant account may involve providing detailed information so the merchant services provider can assess your risk profile and examine your financial history, including your processing history, partnerships, and personal credit history.
  2. Higher payment processing fees: High-risk merchant accounts typically incur higher fees, up to 3.5% plus the interchange rate.
  3. Cash reserve requirements: Payment solution providers may maintain cash reserves for businesses in various ways:
    • Rolling reserve: A high-risk payment processor sets aside a percentage of every transaction, which you’ll receive later (e.g., a six-month rolling agreement would release January’s balance in July).
    • Capped reserve: The processor holds a fixed amount of cash.

High Risk Payment Processors: Your High-Risk Merchant Account Specialist

Save time and costs from the start with High Risk Payments, offering an upfront underwriting process that identifies risk factors early on. Unlike other providers that might cut you off unexpectedly, High Risk Payment Processors won’t surprise you with unfavorable policies.

In conclusion, if you’re a high-risk business seeking a payment processor, understanding high-risk account requirements is essential. High Risk Payment Processors is a reliable option to help you navigate the complex world of high-risk payment processing. Contact them today for a consultation and to assess your business’s risk factors upfront.