High-Risk Credit Card Processing Explained

High Risk Merchant Accounts Pick Up Where Other Processors Quit

A high risk merchant account is similar to the type of credit card one can get if he has poor credit history.  On the bright side, the borrow is able to finance purchases he may not be able to afford in cash, such as medical bills or car maintenance.  On the dark side, it’s going to cost him dearly in high interest rates and finance charges. “High risk” merchant accounts work the same way but from the seller's standpoint.

How to Spot a High Risk Merchant

Business owners who have been previously denied a merchant account due to being deemed as “high risk” usually have either poor personal credit or a business type that is prone to customer experience chargebacks, fraud, or sell legally questionable services or products. Banks are also often wary of providing credit card processing services to businesses that could pose a risk to its own reputation and may deem such businesses as high risk merchants.

Merchants who have poor personal credit histories often ask why their own credit matters.  The answer is that merchant accounts are a form of credit because the merchant is paid by the bank before they collect any actual money from the customer.  In essence, a credit card payment to a merchant is considered a loan for a short amount of time.  Merchant account providers are also at risk of fraudulent activities by merchants with malicious intent, so credit history is one way to determine the risk of doing business with a potential merchant.   Merchants with poor credit history should contact processors that specialize in high risk merchant services. These companies tailor their services to high risk merchant account processing, but at higher rates than traditional merchant accounts.

Merchants with high risk business types also have options for credit card processing.  Just like processors who will accept merchants with poor credit, there are processors that will take on high risk merchant business types. You can see our list of the top five high risk merchant account providers here.

Possible 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)

Dating & Escort Services


  • Sweepstakes
  • Sports Forecasting/Odds Making
  • Lotteries
  • Internet Gambling
  • – OTB (Off-Track Betting)(Generally excludes bingo, pickle cards & raffles for charitable purposes; i.e. Legit charities

Merchants Whose Product/Service May be Illegal

  • Age-Restricted Products (i.e. alcohol sold via MOTO/Ecommerce without proper means of age verification)
  • Tobacco Products sold via MOTO/Ecommerce
  • Prescription Medications sold via MOTO/Ecommerce
  • Medical Marijuana
  • E Cigarettes
  • Illegal synthetic marijuana supplements or “Teas”
  • Paraphernalia Stores (either retail or moto) where over 50% of merchandise is for illegal purpose (water pipes, bongs, etc.)

Money Service Businesses

  • Currency Dealer or Money Exchanger
  • Check Cashing Services
  • Dealer, Seller or Redeemer of Traveler’s Checks, Money Orders, or Stored Value Instruments
  • Money Transmitter
  • Any Organization Diverting Money out of the U.S.

Sexually Oriented and Pornographic Businesses, Materials/Services

  • Adult Telephone Conversations/Audio Text (900
  • Numbers)
  • Adult Book and Video Stores
  • Adult Novelties
  • Adult At-Home Parties (i.e. Passion Parties)
  • Gentlemen’s Clubs
  • Massage Parlors
  • Male/Female “Enhancement” Supplements


  • Airlines
  • Charter Services
  • Tour Operators
  • Travel Agents and Brokers
  • Time Shares 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 an 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

Opening a High Risk Merchant Account

Keep in mind that the rates and fees with a high risk merchant account are going to be considerably more than a traditional merchant account.  This writer recommends that high risk merchants carefully select a high risk merchant account provider because there are a few bad apples that could ruin many of your days.  It is highly advised to avoid high risk offshore merchant accounts as they can pose a significant personal and financial risk if the wrong processor is selected.  As with any merchant account processor, be sure to research all potential processors thoroughly looking for signs that the processor may be less than reputable.  It may also be wise to set up a separate deposit account used only for deposits from the merchant account provider.  In any event, the most important thing to remember is to read the merchant account contract word-for-word.  You don’t want to be surprised in this industry.

Be sure to leave your experiences, questions, or comments in the comment section below.

Reader Comments

Tell Us What You Think

6 User Reviews


    Phil, once a merchant processor stops the rolling reserve, how long are they allowed to hold the monies in the account and do they have to provide this information in writing. We were considered high risk by our original processor and 15% was being held in rolling reserve but we were assured ‘you can access the $ at any time”. We secured merchant processing through our bank afterward and our bank did not deem us high risk, so no rolling reserve was required. We have over $30k being held in a rolling reserve account by our original processor and risk will not release it and will not provide a reason why. The original processor lifted the rolling reserve requirement 70 days ago, but still will not release the funds being held in it. I want to switch to the bank for merchant processing, but I am afraid we will never see the $30k. Any insight you may have would be extremely beneficial.

  • Geri Fultz

    Tim…found the Fee Sweep book very helpful in evaluating provider’s from a fees and services perspective. We plan to use this material to create evaluation criteria for looking at multiple providers. What would be extra helpful is to also include guidance on selecting services that minimize a merchant’s PCI compliance obligations, as those can be very expensive and time consuming as well, if you don’t ask the right questions. One example….While most providers that handle cardholder data will say that their services are “PCI compliant”, I have found that some will not include language in their agreements acknowledging their “responsibility for the security of cardholder data the service providers possess or otherwise store, process or transmit on behalf of the customer, or to the extent that they could impact the security of the customer’s cardholder data environment” (or similar language), or their agreements specifically say that they do not accept any responsibility for securing the cardholder data that they handle. This may cause PCI non-compliance (and fees) for the merchant. You may want to work with a PCI Qualified Security Assessor to develop guidance on selecting providers that help minimize the merchant’s PCI compliance obligations.

  • Tim

    I have down loaded your guide to merchant accounts and found you to be a breath of fresh air in helping e-commerce startups. Your last response here under high risk cc processos specifically e-cig retailers is over 3 years old (2011). Although e-cig is considered high risk it has matured over the last 3 years…
    Is there a chance you could update us (and your manual) on the best cc processors specifically for high risk e-cig related on-line e-commerce businesses??? PLEASE…
    Your latest suggestions only point to “PAYLINE” which looks good I was just hoping for some new processors to compare them to.
    Many new merchant cc processing companies have come out “SPECIALIZING” in e-cig high risk cc processing and we are once again at their mercy of predatory and non uniform pricing.
    Please research and give us…(The retailers of this new business opportunity) a safe haven to search and preserve our profits..
    Thank you for all your efforts.
    Tim Marsh…
    A new e-cig startup that is providing quality products with customer satisfaction at its core.

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