When Traditional Processors Decline
For businesses that have difficulty getting approved for payment processing services, high-risk merchant accounts allow businesses that operate in grey areas of legality, or have a higher risk of chargebacks and fraudulent payments, to accept credit cards.
How to Spot a High-Risk Merchant
Business owners who are denied a standard merchant account are often labeled “high risk” for one of two main reasons: poor personal credit or operating in an emerging industry that isn’t well understood by banks yet. Businesses that sell products or services that banks consider controversial or legally sensitive may also fall into this category.
Banks are cautious about providing payment processing services to businesses that could create financial losses or damage the bank’s reputation. As a result, certain industries are automatically treated as higher risk.
Common High Risk Merchant Business Types
Below is a list of business types that are generally considered to be “high risk” merchants.
Bad Debt Services
- Debt Consolidation
- Credit Counseling
- Credit Restoration/Repair Agencies
- Collection Agencies
- Loan/Mortgage Modification Services
- Credit Card Rate Reduction Services
- Financial Coaching/Restoration (Consulting or Software)
Call Lines
- “Chat” and “Gossip” Lines
- Horoscopes and Fortune Telling (includes retail locations)
Gambling
- Sweepstakes
- Sports Forecasting/Odds Making
- Lotteries
- Internet Gambling
- Off-Track Betting (generally excludes bingo, pickle cards & raffles for charitable purposes)
Merchants Whose Product/Service May be pose legal risks
- Age-Restricted Products (i.e. alcohol sold via MOTO/Ecommerce without proper means of age verification)
- Tobacco Products sold online
- Prescription medications sold online
- Medical marijuana
- Online selling of e-cigarettes and vaping products
- Synthetic cannabis supplements
- Paraphernalia stores (either retail or online) where over 50% of merchandise is for legally sensitive purposes (water pipes, bongs, etc.)
Money Service Businesses
- Currency dealers or money exchangers
- Check cashing services
- Dealers, sellers or redeemers of traveler’s checks, money orders, or stored value instruments
- Money transmitters
- Any organization diverting money out of the U.S.
Sexually Oriented and Pornographic Businesses, Materials/Services
- Adult telephone conversations, audio, and messaging
- Adult book and video stores
- Adult novelties
- Adult at-Home parties (i.e. passion parties)
- Gentlemen’s clubs
- Massage parlors
- Male/female “enhancement” supplements
Travel
- Airlines
- Charter Services
- Tour operators
- Travel agents and brokers
- Timeshares and time share related businesses
- Travel-related membership clubs
- Cruise lines
- Vacation planners
Other Merchants Types
- Bail bonds
- Firearms
- Infomercials
- Multi-level marketing (MLM)
- Merchants offering extended product warranty/guaranty or service plans
- “Opportunity merchants” using a “free/discounted trial period” / “pay for shipping only” model
- Online supplements or nutraceutical businesses using a “free/discounted trial period” / “pay for shipping only” model
High Risk Merchant Account Rate Expectations
Rates and fees with high risk merchant accounts can be considerably higher than a traditional merchant accounts. Typically exceeding 4% of each sale. This is due to a greater perceived risk to processors of incurring financial losses due to customer chargebacks and fraud that may not be recoverable from the business.
Top Ranked High Risk Merchant Account Providers
For merchants seeking a high risk merchant account, please see: High-Risk Merchant Account Providers: A Complete Guide.