As digital transactions become the norm, businesses are increasingly searching for an efficient solution for high risk payment processing. But for some industries, securing traditional payment processing can be an uphill battle. If your business has been labeled “high-risk,” you’ve likely encountered rejections from mainstream providers or faced significantly higher processing fees.

This is where high risk merchant accounts come into play. But what does it mean by high risk merchant accounts? Let’s explore what a high-risk merchant account is in detail.

What Is a High-Risk Merchant Account?

A high-risk merchant account is a type of account that allows businesses with elevated risk factors to accept credit card and debit card payments. These risk factors can include a high chargeback ratio, operating in a regulated or controversial industry, or processing a large volume of international transactions.

Rather than being denied payment processing altogether, high-risk merchants work with providers that specialize in high or low risk payment processing. These providers offer tailored solutions and risk management strategies to help businesses remain compliant and operational.

What Makes a Business “High-Risk”?

There’s no universal definition of what makes a business high-risk. However, most high risk payment gateway providers and acquiring banks assess several factors when evaluating your risk profile, including.

  • Industry type: Some sectors are naturally more prone to fraud or chargebacks. Examples include adult entertainment, supplements, CBD, e-cigarettes, travel services, tech support, gambling, and multi-level marketing (MLM).

  • Processing history: If your business has experienced excessive chargebacks or account terminations in the past, that raises red flags.

  • Startup status: New businesses without a processing track record may be considered riskier.

  • Credit rating: Low personal or business credit scores can signal potential default risks.

  • Legal or regulatory concerns: Operating in heavily regulated or legally ambiguous markets increases risk.

  • High transaction volumes or ticket sizes: Larger transactions or fluctuating volumes may suggest instability or fraud potential.

Each processor has its own set of risk criteria, so you may qualify with one provider even if another turns you down.

How High-Risk Merchant Accounts Differ from Standard Ones

High-risk merchant accounts function similarly to regular accounts. But they come with a few key distinctions.

  • Longer Application Process

Expect to submit detailed documentation, including financial statements, bank records, and even marketing materials. This helps payment providers assess the level of risk before approval.

  • Higher Fees

Processing fees are typically higher for high-risk merchants. While a standard merchant might pay 1.5%–2.9% per transaction, high-risk accounts may face fees as high as 4% or more, along with additional monthly and annual charges.

  • Rolling or Upfront Reserves

To mitigate potential losses, payment processors may hold a portion of your funds in reserve. This reserve can be rolling (e.g., 10% of each transaction held for 180 days), capped, or upfront (a lump sum deposit before account activation).

  • Increased Chargeback Penalties

Because chargebacks are a major concern in high-risk sectors, penalties per chargeback may range from $20 to $100, or more. High chargeback ratios may also lead to account suspension or termination.

  • Volume Caps

Some providers limit the total volume you can process in a month. Exceeding these limits could result in fund holds or further scrutiny.

  • Compliance and Monitoring

You may be subject to ongoing monitoring, stricter Know Your Customer (KYC) requirements, and mandatory tools (like age verification systems) depending on your industry.

Do You Qualify for a High Risk Merchant Account?

Knowing what makes you qualify for a high risk merchant account helps you make valuable decisions for your business. If your business matches any of the following, you likely need a merchant account.

  • Operates in a high-risk industry (adult, CBD, crypto, gambling, etc.)
  • Has a high chargeback or refund rate
  • Is a startup without a payment processing history
  • Serves international customers regularly
  • Processes large transactions or ticket sizes
  • Has low credit scores or prior account terminations

Even if your business is new or hasn’t encountered issues before, payment processors may still categorize you as high-risk based on your industry alone. That’s why working with a provider that offers specialized high risk payment processing solutions is essential.

What to Do If You’re Labeled High-Risk

Being labeled high-risk doesn’t mean your business can’t thrive. It simply means you need to be more strategic about your payment processing options. Here are some practical steps to help you secure the right solution.

  • Be Transparent

You must provide all necessary documents and be upfront about your business model. Concealing information may backfire during underwriting.

  • Reduce Chargebacks

Try to invest in clear product descriptions, responsive customer service, and tracking systems. Setting the right expectations can drastically cut disputes.

  • Maintain Healthy Cash Flow

Maintaining cash reserves in your business account can improve your approval odds and reduce the need for large reserves.

  • Organize Your Documents

You must have at least six months of bank statements, processing history, and business plans ready for review.

  • Work with Experienced Providers

Always choose a provider with a proven track record in your industry. Companies like Cathedral Payments offer payment processing solutions with tailored support and infrastructure designed to meet your unique needs.

Finding the Right High Risk Payment Processing Provider

Not all payment providers are created equal, especially when it comes to high-risk industries. Some mainstream providers like PayPal, Stripe, or Square may initially accept your business, only to freeze your funds or terminate your account later.

Instead, look for processors that specialize in high risk merchant accounts. These include.

  • Cathedral Payments offers a tailored payment processing solution for all high risk businesses.
  • Active Payments is known for flexible underwriting and strong customer service.
  • Durango Merchant Services is ideal for businesses in industries like travel and adult services.
  • Soar Payments offers specialized solutions for firearms, e-cigarettes, and other regulated markets.
  • PaymentCloud provides services to CBD, kratom, and subscription-based businesses.

When evaluating a provider, ask about their experience in your industry, chargeback mitigation tools, support channels, and whether they offer a dedicated high and low risk payment gateway that integrates with your existing platforms.

Wrapping Up

Operating a business in a high-risk category comes with its own set of challenges. However, with the right high risk payment processing partner, those challenges can be managed effectively. A high risk merchant account isn’t a limitation, it’s a tool that makes sure you can operate securely, compliantly, and efficiently.

Ready to simplify high-risk payments? Cathedral Payments makes it easy, secure, and reliable. Our team provides expert custom solutions built for your business. Start here to get approved fast with no hidden fees, just seamless processing.

Partner with us now and discover customized, secure, and reliable solutions with Cathedral Payments.