High-Risk Merchant Account:

What Is It? And how does It Works?


A high-risk merchant account means your payment processor has determined that your business is more susceptible to fraud or chargebacks. High-risk merchant accounts pay higher processing costs to compensate for the risk that the payment processor is taking on. This article outlines why a merchant account could be considered high risk and what it means for your business.

What Does It Mean to Have a High-Risk Merchant Account?

Your business account will be labeled as high-risk if a payment processor believes it is at risk for chargebacks, fraud, or a large number of returns. This could be due to a number of factors, including the fact that you are a new merchant that has never processed payments before, or the fact that your industry is considered high-risk and has a high fraud risk (e.g., controversial products). To compensate for the risk, high-risk merchant accounts pay higher processing fees.


High-Risk Means Higher Fees

Although each credit card processing platform is different, high-risk merchant accounts will all have higher rates. In general, all transaction processing fees will be greater, often more than double those of low-risk merchant accounts. Although low-risk merchants pay a chargeback fee (a cost you pay when a customer challenges a charge directly with their credit card), chargeback fees for high-risk merchants are typically greater.

A high-risk merchant may be required to sign a contract with lengthier terms, pay an early termination fee, or pay a monthly or annual fee. High-risk merchant accounts may also be subject to a rolling reserve, in which the payment processor retains a portion of your earnings until it can confirm that your transactions were not fraudulent or otherwise risky.

Reasons a Merchant May Be Considered High-Risk


Types of Businesses Considered High-Risk

High-Risk Merchant Account vs. Low-Risk Merchant Account

There are a few general characteristics that make a merchant low risk to a payment processor. Low-risk merchants typically have:

Keep in mind that your risk status can change as your business develops. For example, if you go through a high period of growth, your provider may start considering your business high-risk. Or, if you expand to work in different countries, or shift industries, a payment processor may consider this a change in risk level. If this happens, your payment processor will either change your status or may drop you as a client if they do not support high-risk merchants, at which point you’ll need to find a new provider to process your payments.

How Do I Get a High-Risk Merchant Account?

When you apply for a merchant account, you’ll be required to provide business and tax documents. After your application has been processed, your payment provider will assess whether you are a high-risk or low-risk merchant, and adapt their plan accordingly.

Some payment processors are better suited for high-risk clients, so it’s a good idea to shop around and pick the one that best fits your company’s needs. For your convenience, Forbes Advisor has compiled a list of the finest high-risk merchant account providers.

You should study the contract carefully before picking a payment processor, as each bank and payment processing platform is distinct and has various rules for merchants they identify as high risk.