Demystifying High-Risk Credit Card Processing: Your Complete Guide to Understanding and Navigating the Landscape


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A business must initially get a merchant account with an acquiring bank to accept credit card payments. The expense for this service can differ significantly dependent on various elements. Especially the type of business, the way transactions perform, and the historic record risk of misfortune.

A specialized payment processor is required since charges are usually higher for high-risk ventures. Generally, processors stay away from these “perilous” traders due to the apparent dangers. Numerous factors are a threat to high-risk merchants, and the essential risk is the increased chances of chargebacks. Factors include the kind of product or services sold, the average dollar sum for month-to-month sales, and the nations the merchant sells. The sky is the limit from there, and anything can drive the danger of chargebacks altogether higher, leaving banks and processors open to millions in many potential losses.

High-risk status is a bank’s (or alternately processor’s) protection against the expense of such a large number of chargebacks. However, incidentally, such a large number of chargebacks can make a merchant viewed as high-risk. Merchants can be viewed as high-risk after losing a merchant account to many chargebacks and then being added to the Terminated Merchant File. Some may even be viewed as high-risk just on account of the industry in which they operate.

Types of organizations considered high risk

When you apply for a merchant account, you essentially go through an underwriting process with the payment processor. Even though various processors have various standards, here are a few things that might be viewed as warnings and lead your business into being assigned the label of “high risk.”

1. Bad business or individual credit score

Having a bad credit score signals to the payment processor that you probably might not be good with managing your own money or more defenceless to extortion.

2. Merchant account history

If you have a background marked by chargebacks or extortion with another merchant account supplier, this will also affect your application negatively.

3. Years in business

Merchant account providers are warier of clients with less experience in payment processing.

4. Where your business is headquartered

If you offer your services to clients in the United States, but your business’s headquarters is in another country, you pose a higher risk for fraud or embezzlement.

5. Questionable items or services

This changes by the payment processor, yet clear examples are porn and drugs.

6. High-cost purchases

If your normal purchase is abnormally high, you could be viewed as high risk. The more costly the purchase, the more prominent are the chances of fraud.

Organizations that might be viewed as high risk by a payment processor come in all shapes and sizes. Examples incorporate aircraft, escort services, clubs or casinos, e-cigarette sellers, collection agencies, fantasy sports sites, weapons merchants, life mentors, second-hand stores, vacation organizers, and furniture or gadgets stores.

Risks Involved

For most organizations, being named “high-risk” brings just a burden:

1. Inordinate Fees

All processors work with the understanding that high-risk customers will unavoidably create more chargebacks, so they impose restrictive charges directly from the beginning. High-risk merchants are obligated to dish out $300 or more for the initial arrangement, then pay higher month-to-month fees in addition to double or more the typical handling expenses.

Except if a business has huge earning potential, these excessive charges can make a high-risk merchant bankrupt, even without chargebacks.

2. Revenue Stealing Rolling Reserves

High-risk payment processors generally require their customers to have a merchant account reserve, a non-premium-bearing investment account utilized by the procuring bank as a sort of protection. If a chargeback is documented against a business and the dealer can’t repay the responsible bank from its regular account, the reserve will be used to cover the misfortune.

Merchant account reserves hold 5-10% of month-to-month sales for around half a year. The cash in the reserve account still belongs with the merchants—it can’t be accessed until 180 days have passed (expecting there are no fees owed). Restricted access to income, in any case, can cause income issues for merchants.

3. Increased Chargeback Fees

For each chargeback, the merchant is charged a fee that takes care of the authoritative expenses of handling the chargeback. A high-risk payment processor will have higher expenses for every individual occurrence. Also, if a merchant currently in a high-risk business gets unnecessary chargebacks, the costs go up considerably more.

Since high-risk organizations are, by definition, in more danger of sustaining chargebacks, these additional expenses present a sort of “twofold danger” that costs merchants significantly more.

Potential advantages of High-risk Credit Card Processing

We’ve seen how the “high-risk merchant” label harms the merchant, yet is there a potential gain? It might be hard to accept that there are real advantages that cause a few organizations to search for high-risk credit card processors.

Worldwide Expansion

To flourish in an ever-increasing worldwide economy, numerous merchants—especially those in eCommerce—find that the pros of utilizing a high-risk payment processor out ways the cons of higher handling expenses.

Normal or low-risk processors have limits on card transactions that can obstruct online growth. For instance, processors limit or prohibited low-risk merchants from:

  • Dealing principally in card-not-present exchanges
  • Transacting in different monetary currencies  
  • Selling to customers in nations outside the US, Canada, Western or Northern Europe, Japan, or Australia

The earning capability of eCommerce sales alone can make high-risk merchant accounts appear to be engaging; include the possibilities of selling to more places—and in various monetary currencies—and the income opportunities adjust the dangers.

Limitless Earning Potential

Processors likewise limit the type and amount of income generally low-risk merchants create through credit cards. For instance, low-risk merchants can’t:

  • Offer repeating instalments
  • Process more than $20,000 each month
  • Accept credit card exchanges over $500 each
  • Sell certain products or services

However, a recurring payments (membership) model can turn into an economical source of long-term development. Numerous dealers depend on the constant flow of pay that instalment billing and recurring payments can make and think of it as worth the cost of utilizing a high-risk processor. The same is valid for a merchant who looks for the potential benefits of expensive transactions.

Risky Products Can Mean Increased Profits

There is additionally a long list of items and services that credit card networks consider excessively unpredictable for low-risk merchants. At the bare minimum, a business with any of the accompanying MCCs (Merchant class codes) is automatically viewed as high-risk by the card networks:

  • Travel-related arrangement services
  • Outbound or inbound telly marketing merchants
  • Betting, including lottery tickets, gambling club gaming chips, and off-or on-track wagering
  • Drug stores and pharmacies
  • Cigar stores and card-not-present cigarette-deals

It is only a little inspecting of all the “black listed” MCCs. These limitations make it troublesome or difficult to sell items or services in some of the highest revenue-earning areas. With a high-risk merchant account, a business can sell pretty much anything possible.


At last, every one of the indicators of potential risk boils to chargebacks. A processor takes a look at the merchant’s income, contributions, and regular clients to decide the risk of chargebacks. While there isn’t a lot one can do about the subjectivity of the assessment process, merchants can forestall chargebacks from occurring. 


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