High risk merchant account is a special type of account offered by the banks and Credit Card processors for the businesses deemed as high-risk. Such a business has a higher chance of financial risk and the possibility of fraud and chargebacks.
If you are seeking more information on this, we have included the meaning of a high risk merchant account, how such an account works and its benefits. Further, we will see more details about high risk merchant processors like Highriskpay.com, Paymentcloudinc.com and others along with their pricing to open a high risk merchant account.
By the end of this article, you will get complete information about what is a high risk merchant payment processing service and how it will benefit businesses deemed high risk.
What is High risk merchant?
A high risk merchant is a business, individual or entity with greater risk of fraudulent activities, financial losses and chargebacks than any other industry. Due to their nature, such high risk merchants go through challenges when they wish to obtain payment processing services. These businesses are often susceptible to customer disputes, investigation by regulatory authorities, and fraud.
In the industry, such businesses fall largely under the ‘high risk merchants’ category. Multiple factors determine if the businesses are high-risk or not, such as their industry, transaction
methods, and products and services offered by them.
There is no definitive list of businesses or merchants considered “high risk”; however, these are the most notable. Check out the below list of high risk merchants below.
Casinos and Online Gambling:
Gambling itself is a risky activity; however, when talking about online gambling businesses, they involve high risk. From legal rules and regulations and age restrictions to fraud and offshore activities, online gambling leads to high financial and other risks.
Adult entertainment and related products
Adult entertainment businesses fall under high risk merchants because despite providing a variety of products and services, such as streaming video, photographs, escort services, and more, they remain bound by certain rules and regulations. Because of this, many banks will deny the application for such merchant accounts.
Cryptocurrency
Cryptocurrency is a highly volatile investment, and with huge profits, it also comes with huge losses. The merchants involved in cryptocurrency trading platforms, crypto exchange, and ICOs (initial coin offerings) will face the risk of getting fraudulent transactions and uncertainty arising due to regulatory problems.
Tobacco and e-cigarettes
Consider as high risk merchants by financial institutions like banks and payment processors, Tobacco and e-cigarettes businesses are risky and face chargebacks and regulations, among other restrictions,
Pharmaceuticals, Nutraceuticals and Supplements
The business sells supplements, herbal products, remedies, and prescription medications with a higher risk from regulatory authorities, fraudulent transactions and high chargeback rates.
Firearms and Ammunition
The businesses that sell ammunition, firearms and related products face regulations and reputational concerns. Thus, they are high risk businesses.
E-commerce and Dropshipping
Despite tremendous growth opportunities, e-commerce and drop shipping are high risk merchants due to chargebacks, fraudulent activities, inventory risks and many others.
Travel and Tourism
Travel agencies, rentals, hotels, and other associated businesses are at high risk because they face problems from customers or travellers, like cancellation, risks of chargebacks, and unforeseeable future problems.
Debt Collection
In the debt collection business, there are regulatory and legal risks involved, making it a high risk.
MLM (Multi-Level Marketing)
People often criticize multi-level marketing for cheating, fraud, and exploitation among higher financial risks. Such businesses often undergo legal scrutiny and other problems that make them high risk.
Tech Support Services
Promoting technical support, repair services and related business are considered high risk because of fraudulent activities and practised scams.
Besides these high risk merchants, many others could face the risk of payment processing and services from banks and financial institutions.
After going through the list of different high risk businesses or merchants, you may be clear about them. Let us learn more about what factors make a high-risk merchant.
What merchant is a high-risk merchant?
Many factors contribute to making a merchant a ‘high risk merchant’ that involves legal, chargebacks and more. Check all of them here.
High chargeback ratio risks
When the customers are not satisfied with the product or services, they will raise a dispute over the transaction and ask for a refund. High-risk merchants get asked for high charges for multiple reasons, including dissatisfied customers, specific reasons related to the industry, and fraudulent activities. The payment processors consider the high chargeback ratios as a potential financial risk.
Legal and compliance issues
As we saw in the high-risk merchant list, some industries must follow strict regulations and comply with the laws. These include pharmaceuticals, financial services, and alcohol sales. If the business does not comply with the rules and regulations, there will be legal consequences, making it a high financial risk.
Poor Credit History
Merchants with poor credit history could hint at financial difficulties, outstanding debts, bankruptcy, and others that would make them high risk and have payment issues.
Recurring-based or Subscription-Based Billing
Customer dissatisfaction, disputes related to the billing, and recurring charges (unauthorized) will make the merchant offering subscription services or recurring billing models a ‘high-risk merchant’.
Limited History of Operating
The new businesses without substantial operating history may fall under the ‘high risk merchant’ category because of having limited data for assessment. With the limited data, they will need help assessing their financial stability, transaction patterns and other details.
Overseas Business Operations
The merchant that provides services and products overseas may fall under the ‘high risk merchant’ category if they have fraud and weak legal frameworks.
Meaning of High Risk Merchant Account
While a high risk business or merchant has difficulty getting financial services from banks and institutions, the High Risk Merchant Account becomes a great choice for them to cater their business operations. It is a special type of payment processing account for businesses considered high-risk.
Industries that are high risk have higher chances of fraud, scams, chargebacks, legal compliance issues, and regulatory compliance issues. Traditional payment processors find it challenging to offer financial services to such businesses. Such businesses must open their new ‘high-risk merchant account’ to reduce the risk and get financial services.
Specialized payment processors or banks having expertise and experience, povide theh-risk merchant accounts and manage risks to the related industries. They may also help safeguard the businesses by holding back and rolling services that would help mitigate potential losses.
The High Risk Merchant Account popularly includes the names of providers like Instabill, Payline Data, CCBill and Durango Merchant Services. Besides these providers, other popular names include PaymentCloud, First Card Payments, SMB Global, eMerchantBroker and Soar Payments.
It is worth noting that the providers of the high risk merchant account do not give instant approval but may take from minimum 1 to 2 days to 5 maximum days.
High Risk Merchant Accounts – Challenges
Despite offering financial services, high-risk merchant accounts often face a wide range of challenges. These challenges are unique and limit the overall functionality of such accounts.
Limited Account Options
The options for getting a high-risk merchant account are limited as only some payment processors or banks may offer them to businesses with high risk.
Strict Terms of Contracts
The high-risk accounts for businesses come with several strict terms and conditions that put some limitations. They include higher termination fees and long contract durations.
May Face Scrutiny
Businesses deemed high risk face frequent audits and reviews to check if things are going as per the set standards. Further, the
High Risk Merchant Account – How Does It Work?
Businesses can be put in difficult situations when merchant service providers impose restrictions. Businesses can face problems like account suspension, frozen funds, and even account termination.
Out of all these possible outcomes, if a business gets its account terminated, it could lead to serious consequences. These factors make it more difficult to find a new payment processor for a new account.
Amid these fears, merchant service providers with expertise in providing services to high-risk industries and businesses can easily issue accounts without fear of getting terminated.
Each payment processor offers a high-risk merchant account to help high-risk businesses in payment processing. However, not all payment processors offer services to all types of high-risk merchants. They have asset criteria called “credit policy”, in which they provide states for which businesses they allow support.
The payment processors have the ability to underwrite, do due diligence and provide support from their sponsor bank. With ability, the process can take greater risk, and more types of industries fall under high-risk categories.
Standard merchant accounts offer many services, such as linking to payment gateways, payment technology platforms, and virtual terminals. Moreover, high-risk businesses falling under different industry types or following different operations can easily get much-needed payment processing capabilities with their high-risk merchant account.
Benefits of High Risk Payment Processing
High risk payment processing provides several benefits for “high-risk businesses” allowing them to get multiple services previously unavailable.
Easy management of chargebacks
Businesses are having a high risk need to manage their chargebacks such as returns and refunds. The higher the rate of chargebacks, the riskier the business. By having a high risk merchant account, businesses can have the flexibility to manage their chargebacks easily because the payment processors set higher chargeback thresholds.
High risk product sales
The businesses dealing in high risk products, already go through difficulties. So, when the merchant account provider continuously tries interfering with the business, it will affect the overall performance. On the other hand, high-risk payment processors can provide such businesses with some relief and flexibility without putting unnecessary restrictions and providing flexibility in selling their products.
Tailored solutions, guidance and support
Every business is different in terms of products and services and high risk payment processors recognize them very well. If the business needs specialized features or related requirements, the providers offer them tailored assistance, needed guidance and support.
Security
The most important thing about opening any account is the security measures of the high-risk merchant account. The business deals in high-risk products or services that require protection from fraud and chargebacks. In such cases, high risk payment processors offer the best possible security measures that can tackle potential threats.
Safety against account termination
Businesses from high risk industries have big concerns about their payment processing account getting terminated immediately by their providers. It could happen due to many reasons related to the product or the related industry. However, with the help of high-risk payment processors, users can function without facing immediate shutdown or termination of their accounts. With the help of such accounts, the business can get a stable payment processing solution without worrying about their account suspension.
List of Best High Risk Merchant Account Providers
Many best high risk merchant service providers offer unique services and benefits for businesses related to high risk industries. Check out the list of top providers here.
High Risk Pay (HighRiskPay.com)
High Risk Pay offers one of the best payment processing solutions through its high risk merchant account. It has many advantages for the high risk businesses who want to continue long term services. Highriskypay.com helps in chargeback prevention, offers next-day funding, gives 24 hours fast approval, and even offers solutions for businesses with bad credit.
High Risk Pay promises 99% approval rate to the customer and offers all the major credit cards without considering credit. The HighRiskPay.com platform has covered all the major e-commerce integrations. For high risk merchant accounts, Highriskpay.com is the best solution that gives instant approval typically taking 24 to 48 hours which is faster than another provider and at competitive rates.
Additionally, Highriskpay.com provides services like chargeback management, ACH processing, fraud prevention, and high-risk merchant services for businesses with any type of credit industry.
Pricing Structure
- Monthly charges are around $9.95.
- Payment processing fees cost around 2.95%+25 cents.
PaymentCloud
PaymentCloud offers customized payment solutions that fits the needs of any high risk business. From providing merchant account services to fraud charge prevention and accepting payments, PaymentCloud excels at its high-risk payment accounts.
PaymentCloud provides business assistants with an understanding of the best rate required for them. By leveraging multiple backs and processors, PaymentCloud ensures it offers the best services at the lowest possible rates.
There are many pricing structures like interchange-plus, fixed-rate and tiered pricing to choose from PaymentCloud, and the platform makes the migration process much easier.
Without any interruptions, the platform integrates all the payment gateways for businesses.
Price Structures
- Monthly Fees Range from $10 to $45
- Monthly Payment Gateway Fees start from $15
- Monthly Virtual Termination Fees range from $15 to $45
- Transaction Fees
- 2-3.1% for low risk
- 2.3-3.4% for medium risk
- 2.7-4.3% for high risk
- Chargeback Fees are Around $25
First Card Payment
First Card Payments offers secure approvals for businesses seeking high-risk merchant account services. The platform has more than two decades of experience in the industry and has partnered with nearly 30 financial institutions. It offers online payment processing, ACH, and in-person payment options.
It has been working with many high risk merchants and establishing itself in offshore businesses and B2B enterprises. Not only does it offer payment processing services, but it also provides valuable operational support to its clients.
First Card Payments also promises to reduce merchant fees by 25% if they switch to its services.
Price Structure
- Chargeback cost from $10 to $45
- No termination Costs
- Setup is free
- No application charge
Durango Merchant Services
Durango Merchant Services includes experts who help secure high risk merchant accounts. It helps businesses that are high risk services like fast approvals, dedicated account managers, transparent pricing, preferred rejection training and tools, fast approvals and industry-leading technology and services.
Durango Merchant Services has decades of experience providing exceptional services for high-risk merchant accounts. The platform offers services even to small businesses with bad credit and need help getting reliable payment processing services.
Durango Merchant Services is an Offshore high risk merchant account provider that provides quality services and payment types.
Price Structure
- Monthly Fees or Software Fees Start from $10
- The monthly Cost of Additional Access to the Payment Gateway range from $10 to $15
- Setup and Installation Fees $0
- Payment Processing Fees vary
SMB Global Payments
SMB Global Payments officers specialize in solutions for “high risk businesses”. SMB Global Payments has a trusted and divorced portfolio of Banking relationships that offer both flexibility and credibility; it is a great platform that offers exclusively tailored services for international and high-risk businesses.
The platform boasts expertise and modern features as it has partnered with Payline Data, an unknown merchant service provider that offers efficient payment processing solutions, fraud protections and integrated payment gateways.
The platform claims to understand and accommodate the unique needs of the merchants and industries it works with. Further, the platform understands simulation integration and provides 175+ online shopping card integrations for pain-free
connectivity.
SMB Global Payments offer zero rolling reserve requirements, giving businesses financial freedom to reinvest and even providing unlimited processing.
Pricing Structure
- SMB Global Payments setup fees, early termination fees, monthly fees, swipe rate and other expenses vary.
Soar Payments
Soar Payments offers three types of guarantees to businesses that are high risk – instant online quote, minimum price in the industry, and friendly in-house support team. Soar Payments is among the leading providers of high-risk merchant services for multiple businesses and industries. The platform provides integration with accounting, e-commerce platforms and CRM.
Pricing Structure
- Average monthly charges range from $19 to $45
- Rolling Reserves Are Around 5 to 10%
- Chargeback costs range from $25 to $30
- No application or setup charges
- Early termination charges will be based on the merchant’s account
eMerchant Brokers
eMerchant Brokers or EMB provide low and high-risk merchants full-service payment solutions. The platform allows businesses to get benefits such as 24 hours and 7 days of support from the staff, integration with the best e-commerce platforms, and handling a diverse portfolio of merchants.
Most notably, eMerchant Brokers provides services to high-risk merchants, including online gaming, the adult industry, CBD, nutraceuticals, electronic cigarettes, CBD and others. eMerchant Brokers, or EMB, has a remarkable 99% payment processing approval for its clients, making it the first choice for CBD businesses needing trusted and accessible payment solutions. The contract length with eMerchant Brokers ranges from a minimum of 1 to 3 years.
Pricing Structure
- Chargeback costs around $35
- Early termination fees range from $0 to $595
- Rolling reserve is 0 to 10%
- Proprietary payment gateway is $0
- Variable transaction charges
- Variable monthly account charges
Paykings
Paykings offers merchants a High Risk Processor Merchant Account under the “high risk” category. Businesses in such a category need to require custom solutions to get online Credit Card processing. Paykings support industries like Adult, CBD, Vape, pawn shops, e-commerce, credit repair and many other high risk processing industries.
Payking is an international payment provider that provides B2B solutions and additional services like chargeback management, ACH payment processing, transaction security, more credit card processing, and recurring payments.
Pricing Structure
- Transactional charges begin at 2.49%
Bad Credit Merchant Account – Meaning
A bad credit merchant account is useful to the business when it has personal credit that falls outside the underwriting guidelines set by the Financial Institutions or providers for opening an account. The personal credit score plays a major role in getting approval. A bad credit merchant account is a unique payment processing service for individuals or businesses with poor credit history.
With a bad credit history, many traditional banks and Financial Institutions may not allow payment processing services, and this is when the bad credit merchant account becomes no alternate solution.
The term “bad credit” refers to businesses or individuals with a negative history that impacts their creditworthiness. Such businesses and individuals have late payment issues, financial difficulties, and defaults that make it difficult for them to get payment processing services and ultimately affect accepting credit card payments from customers. The merchant or individual with a bad credit history cannot obtain an account and, therefore, needs to rely on payment processing services for businesses without better credit.
Offshore High Risk Merchant Account
Offshore high risk merchant account refers to the accounts spread anywhere in the world without being based in a particular home country. The offshore banks offer offshore high risk merchant accounts in a different country than the client. The term “offshore” means acquiring a bank or payment processor’s location, usually in another country. Offshore banks have a higher tolerance for high risk businesses, and they have underwriting standards that are more flexible compared to traditional financial institutions or banks. By obtaining offshore high-risk merchant accounts, businesses can get a wide range of services for payment processing according to their requirements.
Benefits of having offshore high risk merchant account
- Multi-Currency Processing: It is a benefit in increasing sales and accepting multiple currencies from hundreds of countries, especially if you have settlements from various countries.
- Multi-Channel Processing: Offshore high-risk merchant accounts help businesses easily accept online payments from different platforms. This particular becomes very useful when businesses have to process orders in bulk with patch-up loads. It makes it possible to enter MOTO transactions into virtual terminals.
- Protection Against Frauds: Offshore banks offering such accounts allow businesses to accept good orders and reject bad ones. They follow customizable rules and filters as well.
- Better Rates: The offshore high-risk merchant account offers businesses that may face difficulty in their own country’s market and offers more stability and continuity.
- Privacy: Many Offshore banks provide greater privacy to the offshore high risk merchant account holders.
- High Risk Payment Processing Specialist: Businesses that are high risk can take advantage of high-risk processing specialists that help make things much easier for them.
Businesses can also apply for offshore credit card processing and international payment processing through such offshore banks. High-risk payment processors and other companies offer such services.