BlogA Comprehensive Guide on High Risk Merchant

A Comprehensive Guide on High Risk Merchant

As the digital world is growing rapidly day by day, a successful business needs to adopt cashless payment transactions. In this case, high-risk merchant accounts can let you complete the process.

However, it’s not easy to get approved by a high-risk merchant account, especially for a business. If you want to use high-risk merchant accounts, you need to understand the basics first.  

There is some confusion about this topic. Many newbie business owners can’t understand the difference between a normal merchant and a high-risk merchant account. Overall, it can be a bit hard to understand everything.

That’s why we will cover everything related to this topic in this guide. By the end of this article, your basic understanding will be improved. Keep reading to know more. So, let’s get started.

 Merchant Account

What is a Merchant Account?

In simple words, a merchant account is a business account provided by a financial institute, payment service provider, or bank. When a merchant account is issued by a financial sector, a merchant can accept payments in multiple ways including credit and debit cards.

As we noted before, the key purpose of a merchant account is cashless payment transactions. That’s why it’s quite similar to the current account as multiple transactions are involved here. However, most accounts are provided to low-risk businesses. That’s why they are often called low-risk merchant accounts.

What is a High-Risk Merchant Account?

Most people get confused about a high-risk merchant account as it looks similar to other payment accounts. A high-risk merchant account is quite similar to other payment gateways including card acceptance, cryptocurrencies, and e-wallets.

As we noted before, this account allows a merchant to accept payments in multiple currencies and modes. In most cases, banks and financial institutions label merchant accounts high-risk when they consider a business for high return volume, fraud, and high chargebacks.

Well, there are various reasons that can make a business a high-risk merchant. On the other hand, financial institutions, banks, and PSPs have different criteria that make a business high risk. In the following section, we will share the key characteristics to make everything clear.

Characteristics of a High-Risk Merchant Account

You see, all businesses aren’t high-risk merchant accounts. However, a business can be successful internationally with this account. In this case, there are some characteristics that make a business a high-risk merchant account. Let’s find out the key characteristics in the following list:

International PaymentEvery country has different terms and conditions. And if you want to expand your business in the international market, you have to accept different currencies and payments. And this can be a requirement of a high-risk business.

High Transaction VolumesAs we noted before, a business can be considered high-risk when it has a high translation volume. According to some reports, a company has to receive a $20,000 payment per month to meet the criteria. On the other hand, a single purchase of $500 can be ideal for this category. 

Type of IndustryEven though there are multiple niches, some particular businesses have a chance to be considered high-risk. In this case, we can mention some significant industries including gambling, travel, gaming, and adults.

Low Credit ScoreWhen a business has a low credit score, it can meet the criteria of a high-risk merchant account. However, this point isn’t valid for all companies. In fact, the criteria can change for different countries or regions. 

Problem Faced by a High-Risk Merchant Account

Even though your business is successful, you can face some problems with a high-risk merchant account. If it’s your new business, you have to know about these issues. Keep reading the following section to know more:

1. Higher Chargebacks

High chargebacks are common for any high-risk merchant account. Simply put, this account charges more than a low-risk merchant account. According to some sources, this is for the administration fees. 

As a result, a high-risk company can charge more for a product or service. However, some service providers have three-tier chargeback prevention tolls to reduce higher chargebacks.

2. Higher Chance of Fraud

As we noted before, most high-risk businesses use a high-risk merchant account. And that’s the reason there is a higher chance of fraud. For example, most gambling businesses prefer this type of payment mode and we know the gambling world is full of fraud cases. However, many service providers are implementing an extra filter level for customers.

3. High-Transaction Volume

You see, a low-risk merchant account has up to $500 per transaction. However, it’s not the same with a high-risk merchant account. The transaction volume can be pretty huge in this case. As a result, it can be hard to track every transaction. When you get the approval, you can get various benefits including real-time transaction tracking or e-invoicing.

4. Additional Fees

When you are ready to expand your business with a high-risk merchant account, you have to pay additional fees as well. However, the pattern of additional fees depends on various things, especially on the service provider. In most cases, you have to pay a monthly fee along with a certain percentage for each transaction.

5. Rolling Reserve

Every high-risk merchant account has a rolling reserve. It’s essential for protecting against financial losses caused by chargebacks. For example, it can be a percentage of credit card sales with the payment processor. Plus, the rolling reserve can help a business to forecast the cash flow.

Why a High-Risk Merchant Charges Higher Fees?

Why does a high-risk merchant charge higher fees? Well, it’s a common question for most people. However, there are some valid reasons too. First of all, the percentage of chargebacks and fraud is quite high for high-risk businesses.

On the other hand, high charges are justified as most service providers want to safeguard a business from critical issues and fraud cases. Plus, they use top-notch fraud prevention tools and high-level technologies. Moreover, international cost processing is expensive as well.

How to Get a High-Risk Merchant Account

Getting a merchant account isn’t a cup of cake for all businesses, especially when it’s a low-risk business. However, it’s essential when you want to expand your company in the international market. In short, you need a high-risk merchant account to make your company super successful. 

It can be quite hard but when you implement the right strategies, it will be easier. In most cases, a high-risk merchant account collaborates with a high-risk merchant service provider for the risk-paying process.

In this case, you have to choose a provider with a good history. Plus, the documentation process has to be accurate as well. As a high-risk merchant owner, you have to double-check all documents.

Plus, you have to be honest with your service provider while doing the documentation process. If the information is false, the approval can be delayed or ignored. In fact, your service provider can suspend your merchant account. So, you have to be genuine with everything. 

high risk merchant

Essential Documents For a High-Risk Merchant Account

As we noted before, you need some essential documents to get approval from a high-risk merchant service provider. Now, it also depends on your service provider when it comes to choosing documents. Let’s find out below:

  • Fill out the high-risk merchant account application 
  • Your original photo documentation such as a driver’s license or passport
  • Most recent utility bills to verify the current address
  • Complete bank statements for the last three months
  • Your personal bank’s documentation
  • Partnership agreement
  • Copies of contracts for merchant accounts
  • Complete business plan
  • Evidence of the company’s director’s current address
  • A company certificate or articles of incorporation

These are the common documents that you need to submit to get approval from a high-risk merchant account provider. However, it can change as per the service provider’s requirements.

Wrapping Up

Finally, you can understand how a high-risk merchant account can change the dimension of your business, especially when you want to decode the international market. However, it can be quite crucial during the initial stage. So, you need complete information before taking a step. 

In this case, doing some internet research can be helpful, especially when you are finding a good high-risk service provider. If you are a rookie business owner, get suggestions from an expert.


Q: What are high-risk merchant services?

In simple words, a high-risk merchant service is provided by banks or financial institutions to reduce chargebacks and fraudulent transactions. This service is provided to certain business owners.

Q: What are high risk business examples?

There are various high risk businesses available in today’s world. Some of the most popular goods are gambling, gaming, travel, and adults.

Q: Why do you need a high risk merchant account?

When your business has a greater risk of fraud and chargebacks, you need a high-risk merchant account to expand your business and provide customer security.

Q: What is a low risk merchant account?

A low risk merchant account has a good history and handling the business with no chargebacks or minimum fraud transactions.

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