If your business has ever been declined by a payment processor or charged unusually high fees, you might be categorized as a high-risk merchant. But what does that really mean—and how can you navigate the challenges it brings?
In this blog, we’ll unpack what a high-risk merchant account is, why some businesses fall into this category, and what you can do to mitigate the risks while maintaining seamless payment processing.
What is a High-Risk Merchant Account?
A high-risk merchant account is a type of account provided to businesses that are more likely to experience chargebacks, fraud, or regulatory issues. These accounts are subject to stricter underwriting and higher fees compared to standard merchant accounts.
Why Is a Business Considered High Risk?
Here are some common factors:
- High Chargeback Rates: If your industry is prone to returns or disputes (e.g., subscription services), you may be seen as a liability.
- Regulated Products: Selling CBD, tobacco, adult content, or supplements often attracts regulatory scrutiny.
- International Transactions: Cross-border payments carry additional fraud risks.
- New Businesses: Lack of operating history and credit data can make processors wary.
- Bad Credit: Personal or business credit issues also contribute to risk status.
How to Manage Your High-Risk Status
Even if your business is labeled high-risk, it doesn’t mean you’re out of options. Here’s how to stay ahead:
- Choose the Right Processor
Work with a payment gateway that specializes in high-risk industries. They understand your needs and can offer better terms. - Implement Fraud Prevention Tools
Use tools like 3D Secure, AVS checks, and chargeback alerts to protect your business. - Be Transparent With Customers
Clear return policies and terms of service reduce the likelihood of disputes. - Monitor Your Metrics
Stay on top of chargeback rates, transaction volumes, and average ticket size. Many providers offer real-time dashboards to help.