High-Risk Merchant Accounts FAQ: What Sellers Should Know

If you’ve had trouble getting your ecommerce business approved for a merchant account with a major payment processor, you may have come across the phrase “high-risk merchant account.” Many sellers must engage merchant services providers who specialize in high-risk industries due to the nature of the goods or services they sell or how they sell them.

There’s nothing to worry about if you fall under the high-risk umbrella: It’s a designation that’s assigned and used by banks, and it doesn’t say anything about the viability of your business plan. Here’s what you need to know if you’re looking for the right payment processor to help you open a high-risk merchant account.

What Is a High-Risk Merchant Account?

A merchant account is a bank account that serves as a destination for any funds your business collects from a credit card purchase. Therefore, any company that processes credit card payments needs one.

High-risk merchant accounts are reserved for companies that face a higher risk of fraud and/or chargebacks or meet other criteria that make them less appealing to banks. We’ve included a list of industries typically considered “high-risk” below.

Companies in high-risk industries tend to require increased underwriting and risk monitoring programs. Both must be supported by either a payment provider or a bank, so if you’re a high-risk merchant, you’re essentially looking for financial services providers that are willing to provide a heightened level of support.

The division between high-risk and low- or medium-risk merchant accounts comes down to the amount of financial unpredictability a bank or other financial institution is willing to shoulder. Each bank has its own guidelines regarding what constitutes undue risk. This makes it hard for merchants like you to know which institutions are willing to work with companies like yours. Therefore, selecting the right partner as a high-risk merchant requires a bit of work.

What Is a High-Risk Merchant?

There are multiple criteria merchant services providers look at when considering whether a company should be considered high-risk. You may fall into this category if you:

• See large swings in processing volume (your sales tend to come in spikes followed by big troughs)
• Have an average transaction amount that exceeds $3,000
• Sell internationally, especially in nations with a high risk of fraud
• Accept multiple currencies
• Just launched your ecommerce business
• Have a historical chargeback ratio that exceeds 1%

What Businesses Are Considered High-Risk?

Some industries are also considered inherently high-risk because merchants are more likely to deal with higher chargeback and fraud rates. These industries include:

• Ecommerce and subscription sales
• Adult products or services
• Travel
• Furniture
• Electronics and tech support
• Gambling
• Online dating
• Multilevel marketing
• Credit repair services
• Supplements and nutraceuticals
• Electronic cigarette, CBD and vape merchants
• Debt collection services

How Do I Get a High-Risk Merchant Account?

Your first step in opening a high-risk merchant account is to find credit card processing companies that serve the high-risk payments industry in general and your specific industry. You should reach out to more than one potential partner because your goal is to find a payment processor that will give your business the support it needs.

You’ll need to fill out an application with each high-risk payment processor you’re considering as an account provider. The process is similar to opening any bank account: You’ll need to provide information and documents, including:

• The name(s) and IDs of all principal business owners
• Your business plan and articles of incorporation
• Proof of address
• Tax identification number (TIN)
• Any applicable government licenses
• Financial statements
• Proof of payment card industry (PCI) compliance

The most important part of the application process is honesty: If you qualify for an account by lying about your business, that account could be closed at any time — and then you won’t have any way to process credit card payments.

Our team at sticky.io can help you apply for a high-risk merchant account if you haven’t started yet. Let us know how to reach you, and we’ll be thrilled to guide you through the process.

What Should I Look For in a High-Risk Merchant Account Provider?

Your account provider will be your partner in making sure your customers’ payments are processed efficiently and your profits reach you in a timely manner. You want to work with a payment processor that has:

• Experience with your industry. Especially if you face complex compliance issues or have a heightened risk of specific types of payment fraud, you want a partner who can provide meaningful support when difficulties arise.

• Risk management tools. Chargebacks and fraud are costly to your business, so the more prevention tools provided, the better.

• Live customer support that matches your business hours. Payment processing issues always happen, and you don’t want to be waiting on emails while your customers are waiting on you.

• Processing services that match your needs. Are you selling in a store as well as online? Do you want to incorporate buy now, pay later (BNPL) options? Make sure your payment processor supports your infrastructure.

• Short-term or rolling contracts. High-risk payment processors often trap companies into long contracts to ensure profitability, and you don’t want to find out you're with a subpar service provider after signing the dotted line.

• Competitive fees. You’re already paying more than low-risk merchants, so make sure you get the best deal possible.

How Long Does It Take To Set up a High-Risk Merchant Account?

The wait to set up a high-risk merchant account can vary, so it’s never too early to start looking for a provider. Don’t expect instant approval if you’re in a high-risk industry; because your account will require increased underwriting, it will likely take longer for the bank to approve it.

If you’re working with sticky.io to set up your account, we’ll be there for every step of the process, whether that means just a couple of days or even several weeks.  

How Much Does a High-Risk Merchant Account Cost?

There’s no set cost for any high-risk merchant account. Account providers tend to pass along the cost of their risk management programs, so you’ll likely pay more than holders of standard merchant accounts. The exact price will vary by provider and may also change based on specific risk factors that apply to your industry and company.

Some account providers have fee information on their websites; if they don’t, you’ll need to fill out an application to learn more.

What Are High-Risk Merchant Account Fees?

Every high-risk merchant account comes with multiple fees that cover the various services the account provider offers. You’ll often pay more than a low-risk merchant, and you’ll also have some unique fees. Expect:

• Higher processing fees
• Higher chargeback fees
• Risk Monitoring Program fees
• Higher monthly fees
• Early termination fees
• Setup/registration fees

You may also need to set aside a cash reserve as insurance. While this money won’t go to the payment processor (unless something goes wrong), having a reserve will decrease your cash on hand.

A low-risk payment provider (like PayPal) charges its ecommerce users a 2.9% fee plus $0.30 per transaction. By contrast, a high-risk merchant who uses a payment processor like Paysafe should expect a fee as high as 7.2% plus $0.40 per transaction, plus a required 10% reserve (which is standard for most high-risk merchants).

You may also have to pay a $1,000 annual fee to register as a high-risk business with credit card processors and up to $100 per chargeback on your account. All told, high-risk merchant accounts can be up to twice as expensive as low-risk merchant accounts.

Can I Negotiate the Fees for My High-Risk Merchant Account?

We recommend any high-risk merchant do their best to negotiate their merchant account fees. A payment processor’s upfront pricing may not be the best possible deal— especially if you have a long processing history or process a high volume of payments.

Companies that are approved for more than one high-risk merchant account can always ask for a price match if their service of choice isn’t the lowest. You should also ask for an explanation of each fee to see where else your business might have leverage.

Open a High-Risk Merchant Account the Easy Way

sticky.io knows what it takes to thrive as a high-risk merchant. Our ecommerce subscription experts are ready to help you quickly apply for high-risk merchant accounts via Paysafe and other approved payment processors. As a sticky.io customer, you’ll be able to take advantage of our established partnerships to earn expedited approval, so you can start transacting fast.

Our payment processing partners help high-risk merchants like you process secure and timely payments, so you can scale your direct marketing business. Don’t let acquiring a high-risk merchant account stand in your way of generating revenue and scaling your company.

High-risk merchants typically deal with more chargebacks than low-risk sellers. Learn how to protect your business from chargebacks before they hit your bottom line.