What Is a High-Risk Merchant Account?

If you’ve had trouble being approved for a merchant account at a bank or you’ve hit unexpected roadblocks with payment processing, you might be operating in what’s considered a high-risk industry.

That doesn’t mean your business is doing anything wrong. It only means there’s more complexity involved when it comes to issues like chargebacks, fraud prevention, or regulatory requirements.

Here’s what a high-risk merchant account is, why some companies are labeled as high-risk businesses, and what to expect if you’re looking to get approved.

What is a high-risk merchant account?

A high-risk merchant account is a special type of merchant account designed for businesses with a higher risk of issues like chargebacks for disputed transactions or fraud. If a business is deemed high risk, its bank or credit union may require it to open a high-risk merchant account. These often come with higher fees and stricter contract terms to make up for the risk involved and extra administrative expenses.

What makes a business high risk?

A business may be considered high risk by a bank or payment processor if it operates in an industry that tends to see higher levels of returns, fraud, or regulatory scrutiny. Online gambling, cannabis sales, adult entertainment, and firearm distribution are some common examples of high-risk businesses. However, you don’t have to be in a controversial industry to be considered high risk. Many ecommerce businesses that operate within the rules can still find themselves navigating stricter payment requirements, higher fees, or more rigorous underwriting processes.

For example, businesses that typically handle large transactions face higher chargeback rates. Because a single dispute can represent a major loss, payment providers may see these businesses as financially riskier to support. On the flip side, very low-value transaction values, especially in high volumes or recurring charges, can also raise red flags due to fraud screening and customer disputes.

Service-based businesses—like those offering web design, bookkeeping, or search engine optimization services—can also be considered high risk. These services are sometimes viewed as subjective or difficult to fulfill to a customer’s satisfaction, which may lead to payment disputes. The same applies to dropshipping stores or merchants selling digital products (like ebooks, software, or online courses), where delayed delivery or confusion around what’s being sold can increase refund or fraud claims.

A business’s risk level is based on factors like:

• Chargeback rates 

• Regulatory scrutiny

• Fraud potential

• Financial stability

• Industry reputation

• Typical transaction value

• Business credit history

• Age of the business

• Domestic vs. international sales

Pros and cons of high-risk merchant accounts

High-risk merchant accounts come with trade-offs, but they let businesses accept credit card payments when a traditional bank or payment processor may turn them away. Here are some of the pros and cons of a high-risk merchant account: 

Advantages

• Access to payment processing. If your business operates in a high-risk industry, these accounts make it possible to accept debit and credit card payments, as well as digital wallets. High-risk payment processing lets you reach more customers and grow faster.

• Support for global sales. Many high-risk providers are set up for international transactions, offering multicurrency support and tools to help you sell across borders.

• Stronger fraud protection. High-risk merchant accounts often come with advanced security features designed to spot suspicious activity and reduce chargebacks—helping you protect both your revenue and your reputation.

• More flexibility with sales volume. Businesses with high or fluctuating transaction volumes may find fewer limits or transaction caps with a high-risk merchant account, giving you more room to grow without hitting a trip wire that freezes the account.

• Higher chargeback threshold. Some high-risk merchant account providers are more forgiving of excessive chargebacks, which can be a game-changer if your industry tends to deal with more transaction disputes than average.

Drawbacks

• Higher fees. These accounts come with extra risk and administrative expenses for providers, and your merchant service provider will pass on some of that cost to you. Expect to pay more in setup costs, monthly fees, and per-transaction charges. 

• Reserves. Many high-risk accounts require you to keep a percentage of your sales in reserve, in case of high chargeback ratios. This feature can strain your cash flow, especially if you’re just starting out.

• Slower payouts. You might not get access to your funds as quickly as you would with standard merchant processing accounts. Settlements may take as long as three business days, making it harder to manage your cash flow.

• Stricter contracts. High-risk accounts often come with more complex terms, including longer commitments, early termination fees, or charges for rule violations.

• Perception issues. Being labeled “high risk” can carry a stigma. It may raise doubts among potential partners or lenders, even if you’re running a legitimate and well-managed business.

How to find a high-risk merchant account

Choosing the right high-risk merchant account provider can make a big difference in how smoothly your business runs.

Rather than open one of these accounts at a bank or credit union, businesses operating in high-risk industries can use a third-party company like an ISO/MSP (independent sales organization/merchant services provider). Adyen, Authorize.net, Cybersource, PaymentCloud, and Trust Payments are just a few examples of these high-risk merchant account providers. Some high-risk merchant services providers integrate with popular ecommerce platforms like Shopify as well as some accounting software to process transactions.

Here are some key factors to consider for high-risk businesses:

• Clear, upfront pricing. A high-risk merchant account should offer a smooth application process and transparent pricing on setup, monthly charges, payment processing fees, and any other costs. 

• Industry expertise. Check the merchant account provider’s website to find a list of high-risk industries they work with. A provider that understands your industry is better equipped to offer relevant solutions and help you navigate the challenges that come with your specific business model.

• Flexible contracts. Long-term contracts with steep cancellation fees can make it hard to pivot if your business needs to change. Merchant account providers with flexible terms are a better long-term partner. 

• Proven track record. Check out reviews and testimonials, especially from other high-risk businesses like yours. A strong reputation signals that the provider can deliver payment processing solutions.

• Built-in security. High-risk businesses are more vulnerable to chargebacks and fraud. Make sure the provider offers strong security features and fraud prevention tools.

• Responsive support. Reliable customer support matters, especially when payments are on the line. Look for providers that offer 24/7 help across multiple channels.

• Platform compatibility. Ensure your provider’s payment solutions integrate smoothly with your ecommerce setup and other tools you use.

• International sales. If you sell globally, check whether the provider supports multiple currencies and understands the rules for cross-border transactions.

• Read the fine print. Before signing a contract, take time to understand the full agreement, including contract length, cancellation policies, and any clauses that could affect your operations.