If you’re running an online business, knowing all the risks associated with your operations can save you much trouble. If you’re processing credit card transactions and your operations involve a higher risk of chargebacks, you’d probably want to consider the perks of having a high-risk merchant account.

Opening this type of account requires finding an acquiring bank that will underwrite your enterprise. Since finding one can be tricky, you can resort to a reliable payment service provider for the necessary assistance.

A high-risk merchant account is a business payment processing account for businesses deemed to be of high risk to financial institutions. Since this type of business account is more prone to chargebacks, banks charge higher fees for their merchant services.

Let’s see the pros and cons of a merchant account for high risk business transactions, the fees, and everything else you need to know about it.

What is a high-risk merchant?

It’s collateral, typically a fee or the amount of money a business is expected to pay out in case of any fraud or chargebacks. Banks consider a business risky when there’s a high potential of chargebacks. They usually check the company’s record and history to see any traces of refunds and chargebacks and may put a rolling reserve on a business account if the risk is high.

The two critical factors in determining the risk associated with a company are processing history and industry reputation. The more chargebacks a business has, the higher the risk. Keeping your business chargeback ratio below 0.9% of your total transactions is most recommended.

A high-risk merchant includes the following characteristics:

  • Over $20,000 average monthly sales volumes
  • Over $500 average credit card transaction
  • Multiple currencies accepted
  • Excessive chargebacks and history of refunds
  • High-risk product offering (digital goods, software, seasonal items, tickets, etc.)
  • A company conducts business in countries and industries known for high levels of fraud

Some of the best examples of high-risk businesses are adult-themed websites, game codes, hacks, health and wellness products, high average ticket sales, annual contracts, forex trading, online gambling, the travel industry, etc.

High-risk merchant account fees

It is no surprise that high-risk merchant accounts cost more than low-risk business accounts. Since a high-risk business includes higher charges and risks, you should expect to pay more in account fees and payment processing charges.

Thankfully, various payment processors offer their services to high-risk merchants at quite acceptable prices. The trick to finding the most cost-efficient one is to research the competitive rates and find candidates with pricing tailored to your specific needs.

Top high-risk payment providers charge various fees, such as PCI fees, monthly and annual fees, and setup fees. In some cases, there is also an early termination fee for merchants that want to close the account before the contract expiry date.

A high-risk merchant rolling reserve

A rolling reserve is the most common expense for high-risk businesses. The banks use this type of collateral as protection against expected situations, such as fraud or chargebacks.

The higher the risk associated with your business, the higher the rolling reserve. The bank will hold on to it for a defined period, after which the funds are released and automatically settled in your weekly statements.

Chargeback fees

Chargeback fees are the most common expenses associated with high-risk merchant accounts. These fees are payments that banks require to cover the administrative costs of processing the chargeback. In most cases, the chargeback fee rate is negotiable, depending on the payment processor.

Pros and cons of a high-risk merchant account

Some of the main disadvantages of a merchant account for high-risk businesses are the higher cost of processing rates and account fees. There’s also that rolling reserve to worry about, all because of higher risk.

However, where there are limitations, there are also some benefits, such as:

  • Global coverage – Accept multiple currencies to grow your business by expanding into larger markets.
  • High-risk protection – Discover better opportunities to keep your business account in good standing and avoid paying hefty fines.
  • Business growth – Discover great opportunities for long-term business growth globally.
  • Increased profits – The fewer complications you face, the more you earn.

A merchant account should be your primary concern if your business faces higher risk daily.

Final thoughts

As you can see, high-risk businesses must have a suitable merchant account to mitigate some risks and lower the chance of exposing their reputation to any dispute. A top-grade payment platform is all it takes to minimize the risk of fraud and chargebacks.


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