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What is a High-Risk Merchant

Updated: Dec 29, 2023

When a business wants the ability to accept debit and credit cards, it will have to go through an application process with a payment's provider. This evaluation will classify the company as either low-risk or high-risk, which then dictates what type of merchant account is needed. High-risk merchant accounts tend to be more complicated (and have more restrictions) so it’s important to understand what a high-risk merchant account actually is, and why it matters for your business!


High-Risk Merchant Accounts

A high-risk merchant is what a payments provider will label a business that is at a higher risk of fraud, has a bigger volume of returns, or will potentially receive a greater number of chargebacks. This elevated financial exposure for high-risk accounts is why it’s harder to find payment solutions for those looking to accept credit cards. There are payment companies, like Align eCommerce, who are equipped to handle high-risk merchants, but not all processors can (or will) take on these riskier accounts.


§ Why a merchant might be categorized as high-risk: every processor will have their own set of conditions that help determine if a merchant is high-risk, but in general these are some of the most common reasons you’ll see…


1. New merchant- sometimes just being a new merchant can have you classified as high-risk simply because there’s no processing history to show otherwise.

2. Accepting international payments- certain countries are red flagged as they are known to have a higher risk of fraud… so accepting payments from these places can be an indication of financial dishonesty that will cause your business to then be deemed high-risk.

3. High-risk industry- and just like countries, some industries are also considered to have a higher risk of fraud, chargebacks, or returns. These ventures include things like subscription services, ecommerce sites, online gambling, the adult industry, CBD and vape shops, etc.

4. High transaction volume- if your average sale is a high-priced item, or if you’re processing a very large amount of money on a monthly basis, this could be looked at as high-risk as well.

5. Low credit score- yes, even having a low credit score as a business owner can get your company labeled high-risk.


§ Why it matters: there’s one big reason why being a high-risk business matters- money! High-risk means higher processing fees, higher chargeback fees, and potentially a mandatory reserve (where the processor holds some of your money as collateral). These are typical high-risk account conditions, but paying more than required doesn’t have to be…


Not all payment service providers will work with high-risk merchants- but at Align eCommerce, we specialize in it! For an easy application process, and a guarantee you’ll never overpay for a high-risk merchant account again, contact us at Align. We’re here for all your processing needs!


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