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Last Updated on 3 years by AllinAllSpace

When it comes to getting a merchant account as a business, high-risk credit card processing may be uncharted territory. Credit cards are already a complicated issue for many businesses, add the “high risk” credit card processing factor to it, and credit card processing becomes much more problematic.

Numerous underlying criteria determine whether a company is labeled high risk or not, and navigating this maze can be challenging. So, in this article, we’ll help find out what is high-risk credit card processing and whether you should use it.

What is high-risk credit card processing?

A firm must first open a merchant account with an acquiring bank to accept credit card payments. The cost of the service varies greatly depending on several criteria. This includes the type of business, how transactions are carried out, and the risk of loss in the past.

Fees for high-risk businesses are naturally higher, and a specialized payment processor is frequently necessary. Due to the obvious perceived hazards, processors generally avoid these “hazardous” merchants.

The most significant danger by high-risk merchants is the higher likelihood of chargebacks, one of several elements that make them a concern. Several factors, such as the variety of products or services sold, the average monthly dollar amount for sales, the nations the merchant sells, and others, can significantly increase the likelihood of chargebacks. This will leave banks and processors vulnerable to millions in potential losses.

A bank’s (or processor’s) guard against the cost of too many chargebacks is high-risk status, but conversely, too many chargebacks might make a merchant high-risk. After losing a merchant account due to excessive chargebacks and being added to the Terminated Merchant File, merchants might be classified high-risk.

Potential pluses of high-risk credit card processing

We’ve seen how “high-risk merchant” designation harms businesses, but is there a silver lining? It may not be easy to believe that some firms seek high-risk credit card processors for legitimate reasons.

Global expansion

Many merchants, particularly those in the e-commerce industry, discover that the benefits of utilizing a high-risk payment processor exceed the disadvantages of higher processing fees to compete in an increasingly global market.

Limits on card transactions are imposed by normal or low-risk processors, which can stifle online growth. Processors, for example, restrict or prohibit low-risk merchants from:

  • Predominantly dealing with card-not-present transactions.
  • Buying and selling in a variety of countries and currencies.
  • Clients from countries other than the United States, Canada, Western or Northern Europe, Japan, or Australia.

The potential earnings from e-commerce sales alone can make high-risk merchant accounts tempting. Throw in the possibility of selling in other places—and in more currencies—and the revenue opportunities may just outweigh the risks.

Unlimited earning potential

Processors likewise limit Low-risk businesses’ ability to make money using credit cards. Low-risk businesses, for example, are unable to: 

  • Accept recurring payments.
  • Monthly processing of more than $20,000.
  • Accept credit card transactions with a total value of more than $500 each.
  • Offer specific items or services for sale.

A recurring payment (subscription) plan, on the other hand, can be a long-term source of growth. Many merchants rely on the continuous stream of money that installment billing and recurring payments can provide and consider the cost of employing a high-risk processor to be well worth it. Merchants who want the potential rewards of high-ticket transactions are in the same boat.

Risky products can mean increased profits

Many items and services are likewise considered too risky for low-risk merchants by credit card networks. A firm with any of the following MCCs (merchant category codes) is deemed high-risk by the card networks at the very least:

  • Services relating to travel arrangements.
  • Telemarketing companies, both outbound and incoming.
  • Betting, which includes lottery tickets, casino gaming chips, and off-track and on-track wagering.
  • Pharmacies and drugstores.
  • Cigar shops and cigarette sales without a credit card.

This is just a sample of the MCCs that have been “blacklisted.” Due to these limitations, selling items or services in some of the most lucrative industries is difficult or impossible. A high-risk merchant account allows a company to sell almost anything.

Payment processors

Chargebacks account for the majority of payment processor problems. To assess how much of a risk you are, the processor looks at your payment history, the number of years in business, and types of clientele. Chargebacks negatively impact revenue utilization. They’re connected to the bulk of high-risk payment processors’ drawbacks.

Exorbitant transaction costs

The merchant is charged with a processing fee each time a chargeback is received. You may be increasing your revenue in other ways, but you are unaware of the extra costs that a high-risk payment processor may charge. The cost of a company with a high chargeback rate grows as the number of transactions increases.

Payment processors typically charge higher fees from the beginning of the merchant account setup because of the dangers of these unavoidable chargebacks. The expenses are more significant than usual processing fees, and they keep rising month after month.

If not correctly handled, the charges can jeopardize the viability of most high-risk enterprises. Even when there are no chargebacks, high-risk organizations frequently experience cash flow problems resulting from transaction costs.

Low customer conversion rates

Payment processors’ strict restrictions might stifle business expansion. Customers expect an easy check-in to your website and quick approval of purchases, whether you run a substantial online store or a small local business. As a result, if you use strong security measures, you may reject all questionable transactions, some of which are legitimate purchases.

This is how false declines occur. While being cautious, the system alerts legal transactions because of discrepancies in delivery addresses, billing information, or a high-risk country. If the objections aren’t real, the fake declines could lose you a sale.

Repeated false declines can harm the reputation of the processors. False declines frequently drive customers away from your company, resulting in low conversion rates. A merchant business that can’t keep clients will have a hard time staying in business in the long run.


Selecting a dependable and trustworthy credit card processor for your online business is critical to your long-term and short-term success. After all, this is the soul of the company, so don’t take it for granted. Don’t settle for the first service you come across. Instead, conduct thorough research to find the best fit for your needs.

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