What to do if you need a high-risk merchant account

Unless you’re launching a cash-only business, you should make sure your customers can pay on your site. To do that, you need a merchant account. When opening one, you may learn that your business has a high-risk nature. But the sky isn’t falling; that just means the procedure of creating an account won’t be standard. 


In the article, we’ll take a closer look at what businesses are deemed risky, and how to accept payments if your store carries the high-risk tag.

Merchant account definition

Before digging deeper into the high-risk merchant accounts, let’s find out what a traditional merchant account is. It’s a kind of business account set up in the acquiring bank. A seller needs one to accept credit and debit cards right in their online store. 


Opening a merchant account has always been an uphill battle. That comes hand in hand with tons of paperwork and hefty expenses. Long story short, a business owner has to: 

  • have a legal entity identifier (LEI); 
  • prove their credit reputation; 
  • have PCI DSS certification;
  • provide a bank with all the required documentation to show the company’s finances, money turnover and taxation (the documents vary from one bank to another). 

A seller can’t access a merchant account directly like a regular one. Here is why: when buyers pay on the website, an acquiring bank collects money and stores it. A merchant can deposit funds in their personal account only after covering bank fees.

All you need to know about a high-risk merchant account

A high-risk merchant account is an account opened by businesses that might cause problems to the acquiring banks. Your enterprise can be perfectly fine, legal and not dangerous at all. But if you regularly deal with chargebacks and returns, the chances are you’ll be labelled as a high-risk merchant. By the way, if you have any chargeback-related questions, we’ve got you covered. There is an article in our blog “What is a chargeback: The answers you’ve been looking for”. Go ahead and read it to find out more about refunds.  


Your business may also be designated as high risk because of the credit card fraud. Remember that security should be of top priority no matter the status of your merchant account. That’s why PCI DSS certification is an obligatory requirement for everyone who sells online. If your store has been exposed to many fraudulent transactions, it’ll be deemed as high risk.  


As a seller, you go all out to generate more sales. However, the more transactions you process, the more chances to be hacked by black hats. For merchant service providers it’s a telltale sign you need a non-standard solution.  


The same is with your average transaction value. If it goes beyond hundreds of dollars, your customers are likely to file chargebacks. Hefty price tags make buyers more demanding. They wish superior product quality, and if they don’t get it, they want their money back immediately. Banks don’t want to deal with your regular refunds, that’s why you’ll need to set up a high-risk merchant account.

Covering the basics: Low-risk merchant account

A low-risk merchant account is an account used by sellers with zero-to-low chargeback ratio. Here are some more signs your business isn’t risky: 

  • your monthly money turnover doesn’t go beyond $20 000; 
  • your average ticket size doesn’t exceed $50; 
  • the number of returns is close to nothing; 
  • you work in the UK, the USA, Europe, Australia or other developed countries; 
  • the industry you’re working in isn’t exposed to risks (e.g. you sell household items, clothes, shoes, books, office suppliers, etc.).

The above characteristics aren’t set in stone. Every bank has its criteria to estimate how risky it is to provide services to you. They highly depend on your business type, processed volume and other factors. When contacting a financial institution, you’ll be informed about them.

What businesses are high risk

Some industries are more prone to chargebacks and hacker attacks than others. For example, a travel agency faces more refunds than a shop that sells stationery. There are plenty of reasons why a flight may be cancelled or delayed, and it is the travel company that should carry the can. 


The problem is we can’t list all the industries and business types that might be flagged as high risk. There are too many of them. But we’ve got together a list of the most common ones:

  • pharmaceuticals;
  • dating;
  • gaming; 
  • antiques;
  • annual memberships;
  • software; 
  • lodging/travel; 
  • cars/car parts;
  • jewellery;
  • tobacco/vaping;
  • warranties;
  • and the list goes on and on. 

Some of those business types are risky because they border on legality. Others are associated with high-volume transactions like car sales or jewellery. If we speak about annual membership or travel niche, there can be many unsatisfied customers that initiate chargebacks. If you are involved in one of those businesses or a similar one, you’ll need a non-standard merchant account.

Positives and negatives of having a high-risk business

If you happen to be a high-risk merchant, you should jump through the hoops to open an account. The truth is it’s never been easy to set up a regular merchant account, and if it’s a high-risk one, things get even more complicated. A business owner should not only hand in a bunch of documents to the bank but also goes through the additional examination and oversight. The settlement period may last for weeks. 


Another drawback of having a high-risk business is that you can always be rejected. For example, if a seller’s faced too many chargebacks, or their history is full of fraud incidents, a bank can refuse to open an account.  


Here are some other disadvantages associated with a risque account: 

  • Transaction fees. The commission rate is usually twice higher than the one paid by low-risk merchants.   
  • Monthly or annual fees. A high-risk merchant account can be budget-blowing. On average you will be asked to pay about $50-100 per month just to keep your account up and running. Some banks may bill you for $500 per month, depending on your business type and transaction history. 
  • Reserves. A high-risk merchant is usually charged a rolling reserve. It’s money withdrawn by the bank. A rolling reserve is kept for a specific period, and it acts as a buffer in case of chargebacks or fraud incidents on a seller’s side.

Running a risque business is a hard thing to do. So, are there any positives? Here is a couple of them: 

  • International distribution. You can enter a global market, therefore, grow your business exponentially. Sellers can offer multiple currencies to their customers to choose from. And they’re allowed to sell beyond their country’s borders.  
  • Better protection. If a merchant has plenty of chargebacks, the payment system can even terminate their relationship, meaning that the seller won’t be able to accept Visa or MasterCard cards at their store. As a high-risk merchant, you don’t need to be afraid of surpassing a chargeback limit. But that doesn’t mean you can neglect safety.

I don’t want to open a high-risk account. What are my options?

Opening a high-risk account is no picnic. Besides, fees may literally go through the roof, so you’ll have to dig deep into your pockets to cover all of them. The good news is that accepting card payments is possible without headaches. More and more merchants choose to work with payment processing platforms instead of contacting acquiring banks directly. 


A payment provider acts as a middleman between a seller and a bank. It takes all the responsibility for accepting and processing transactions as well as monitors them in real time to spot any suspicious operations. 


Finding a reliable payment provider might be challenging, especially the one that knows the ropes in the high-risk industry. Luckily, Tranzzo is here to help you out. We provide high-risk merchants with top-notch solutions to streamline their business performance. All we ask is to meet our requirements. There are some industries we don’t work with. Follow the link to check them out. 


Security is our guiding light. Tranzzo complies with the highest level of the PCI DSS standards so your clients can feel safe when shopping on your site. And of course, you don’t need to obtain a certificate yourself as we process all the transactions. Tranzzo also exploits a three-level anti-fraud system, 3DS and CVV-check to ward fraudsters off. 


Our clients can add recurring billing, card payments, Apple Pay, Google Pay, Telegram Pay, online invoicing and other payment methods to their sites. And that is without hidden commissions, set-up cost and sky-high monthly fees. 


We ask sellers to pay a certain commission per transaction. For high-risk merchants, it is higher than for regular ones. But rest assured that we put a premium on providing transparency to our clients. So, you’re welcome to discuss our pricing plans and requirements before signing up. Get ahold of us, and we’ll consult you about anything in between.