Skip to content

The Twists and Turns of High-Risk Merchant Accounts

Friday, March 18th, 2022

The Twists and Turns of High-Risk Merchant Accounts

A high-risk merchant account is a payment processor for businesses that are considered very likely to have chargebacks. This can be due to the industry, business model, or history of the company’s owners. Because high-risk accounts pose a greater risk for the processor, they are often subject to additional fees and higher rates.

Merchants who operate in this space need to work with a high-risk merchant account provider in order to process credit card payments. These accounts are essentially specialized payment processing accounts that allow these businesses to accept major credit cards, like Visa and MasterCard, as well as debit cards.

High-Risk Factors: What Makes a Company Risky

Many different factors go into whether a business will be deemed “high risk.” Some of the most common ones include:

  • Selling products that have higher-than-average rates of return and customer dissatisfaction, 
  • Having an owner with poor credit or a past bankruptcy.
  • Businesses with a history of customer chargebacks are also labeled as high risk because this places an undue burden on the processing company.
  • Frequent customer disputes.
  • Business selling items with big-ticket value.
  • Businesses in industries that have been heavily targeted by hackers, such as retail and hospitality.

Lastly, businesses that have been previously shut down by a payment processor for breaking terms of service

Which Businesses Are High Risk?

Some of the most common industries considered “high risk” include:

  • Gaming & Gambling
  • Adult Entertainment Services
  • Travel & Tourism
  • Pharmaceuticals & Supplements (including CBD)
  • Auctions (including eBay)
  • Telecom services

Online dating & relationship services are also considered risky businesses.

The Possible Constraints of Running a High-risk Merchant Account

  1. Rolling reserve funds

 A rolling reserve fund is money set aside by the merchant processor specifically to cover any potential chargebacks that might occur during the life of a business. This is typically 10% or more of sales volume and is held for 6 months to 2 years. Some providers offer non-rolling reserves that don’t expire after a set period of time.

      2. Higher processing fees

High-risk merchants typically pay higher fees than other businesses because they represent a greater risk to processors.

      3. Stricter regulations

A high-risk merchant will be held to stricter regulations than other merchants, meaning they won’t have as much leeway when it comes to what they can sell, how they can sell it, and who they can sell it to. High-risk merchants will also face stricter regulations regarding minimum sales volume thresholds or monthly sales caps, as well as possible daily processing limits or weekly limits on transaction volume.


High-risk merchant accounts may be prone to the unexpected holding of funds and sudden account terminations. Nevertheless, risky merchants can still enjoy convenient payment processing in the hands of the right service provider.