Merchant Account Services Services and High-Risk Merchant Accounts – an Overview

Getting a high-risk merchant account is not easy. The merchant has to provide complete tax and business information and, mostly, submit to credit checks. In case the payment processor finds out something in your application that signals you as a high-risk merchant, chances are high that your application may be refused. Even if the processor agrees to allot you a merchant account, high fees and rates may be imposed on you to compensate your high-risk status. High risk merchant accounts are likely to invite high rate of chargebacks, fraudulent charges, and several other issues.


Remember, every processor follows different standards for “high-risk merchants,” which means you if one processor has deemed your business risky doesn’t imply that all processors will do the same. However, if you should expect higher fees in return. Usually, high-risk merchants end up paying around one or two percent higher fees per transaction compared to low-risk merchants. Let’s quickly understand what to expect from your high-risk merchant account!

Longer contracts

As a high-risk merchant, you may be required to sign a long-term contract. The payment processors do this to lock in the rates/fees that are best for them, irrespective of the fact that you may become a lower-risk merchant over time.

Chargeback fee:

This fee is assessed by your processor on your merchant account whenever there is a chargeback. Mostly, high-risk merchants have to pay higher chargeback fees in comparison to low-risk merchants.

Early termination fee

In case you terminate the contract before its expiry, you may have to pay this fee. The early termination fee will depend entirely on the terms included in your contract with the processor.

Tiered pricing

While some merchant account services providers may offer interchange-plus pricing to such merchants, it is quite common for these processors to receive tiered pricing that generally costs higher per transaction.

Maintain a reserve

Many merchant account services providers may keep your credit card sales’ additional portion to manage chargebacks and frauds. There are several types of reserves your payment processing company may want you to maintain and these include upfront, fixed, or rolling.

Upfront reserve

This is the money you must place in escrow right in the beginning of the contract. This money is not refunded until the reserve’s full value is met in processing fees.

Clause of automatic renewal

When applying for a merchant account for your high-risk business, remember that most processors may include the auto-renewal clause to ensure the contract is extended beyond the initial expiry date. You should, therefore, study your contract carefully to pay attention to this close and decide whether you want auto-renewal of the contract or not.

Clause of Liquidated damages

To add to the woes of high-risk merchants, many processors may include a liquidated damages clause in the contract along with the early termination fees. This clause specifies the additional charges you will have to pay in case you fail to meet the contract terms.

Rolling reserve

The processor withholds a fixed portion of your daily sales as a rolling reserve for a specified time period and gradually releases this fund back to you.

Fixed/capped reserve

With this, the processors withhold each transaction’s additional percentage till the time the reserve has reached an agreed-upon amount in the contract

Account terminations or freezes

If your merchant account becomes riskier gradually, your account may freeze forbidding you to accept credit/debit card transactions. In case the issue persists, the processor may even terminate your merchant account right away. This is quite common with a lot of merchant account payment processing companies.

What type of businesses
are considered high-risk?

Whether your business falls in the “high-risk” category or not depends on the standards of your payment processor. While every processor has different standards, there are a few things you need to be wary about as they may put your business under the “high-risk” category.

What type of businesses
are considered high-risk?

If most merchant account services providers and payment processors have identified you as a high-risk merchant, finding the right processor may be difficult. But it is not impossible. Payment processors such as Payment USA specialize in high-risk merchant account services. Connect with the high-risk merchant account experts at Payment USA for assistance.

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