What is a High Risk Merchant Account?


If you’ve applied for a merchant account to accept online credit card payments, you may have been told you need a high risk merchant account. While most business owners know of some businesses that fit in the category, they may be surprised to be included in the list.

Who Gets Classified as High Risk

Two criteria determine a business qualification as high risk. First, the financial stability and history of the company will impact how it’s classified. This may mean the business has a history of not paying bills on time or it may simply mean the business is new with no established history.

The second criteria is what industry the business is in. Many industries as a whole have a higher level of risk and every business within that industry pays the price. Many business owners know that e-commerce, collections agencies, and firearms sellers are classified in this category, but they may be surprised to find magazine subscription services, travel agencies and ticket vendors also belong in this group.

In general, a business gets this classification if customers are more likely to request a chargeback. Industries with a higher rate of fraud are consider high risk or those which accept payments without a signature or other means of verification.

What is a High Risk Merchant Accounts?

Payment processors usually require high risk merchants to pay a higher fee or a large deposit upfront. They may require big setup fees or include restrictions on the account. This can limit the business’ ability to continue accepting credit card payments if the costs are too high.

Processors that offer a high risk merchant account understand the issues surrounding them. At the same time, they offer better solutions to benefit the processor and the merchant. First, they are more likely to approve the application than standard processors because they are prepared for the increased risk.

Second, they are not competing against those other processors but with companies who also specialize in high risk accounts. This means they must offer a more attractive product than their competition. They also understand the limitations for these businesses and will find a way to work around them. For example, they may not require a deposit upfront or charge a high setup fee. They may reduce or eliminate any restrictions on the merchant’s ability to process payments. Finally, they will offer a competitive rate on fees that is affordable for the companies while taking into account the increased level of risk.

A company labeled as a high risk merchant can find payment accounts that are affordable and will accept them. The key is to shop around and compare products from the various companies. If you are a merchant labeled as high risk, contact MIDsource to help you find the right account for your online credit card payments.