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High-Risk Merchant Account: Essential Tips and Warnings

By Chase Nightingale

In the dynamic world of eCommerce, securing a high-risk merchant account is a pivotal step for businesses operating within sectors deemed as ‘high risk’ by financial institutions. These accounts are essential for managing risk, facilitating credit card processing, and ensuring seamless transactions through high-risk payment gateways. However, navigating the complexities of acquiring and maintaining such an account requires a deep understanding of the associated challenges and the intricate landscape of risk management. This understanding is crucial for businesses aiming to thrive without facing interruptions in their payment processes or finding themselves unexpectedly on a match list.

This article will delve into the intricacies of high-risk merchants, outlining the challenges they face and why certain processors are hesitant to engage with them. It will discuss alternative solutions for high-risk merchant processing that bypass traditional barriers, offering a safer and more compliant route for businesses in need. By exploring these avenues, merchants can achieve the stability and scalability necessary for long-term success, steering clear of the pitfalls associated with low-risk processors and the prohibitive measures that can lead to account termination.

Understanding High-Risk Merchants

High-risk merchants are businesses that face a greater likelihood of chargebacks and fraud, which necessitates a specialized high-risk merchant account to accept debit and credit card payments. The classification of a business as high-risk is not determined by a single framework or central authority; instead, each payment processor and bank sets its own standards based on a variety of risk factors. These factors often include the industry’s reputation, the potential for legal issues, and the financial stability of the company.

Common Industries Considered High-Risk

Several industries are inherently considered high-risk due to their business practices, customer interactions, or the nature of the transactions involved. Notable examples include:

  1. CBD Products: The legal complexities surrounding cannabinoids make this industry a frequent candidate for high-risk categorization.
  2. Vaping and E-cigarettes: Due to health concerns and regulatory scrutiny, these businesses face significant challenges in securing standard payment processing solutions.
  3. Adult Entertainment: This industry is often flagged for high chargeback rates and legal concerns, impacting its ability to secure traditional merchant services.
  4. Multi Level Marketing (MLM): MLMs are scrutinized due to their sales tactics and the high volume of chargebacks.
  5. Tech Support: Businesses offering these services are often considered risky because of frequent disputes and chargeback claims.

Other industries that commonly require high-risk merchant accounts include gambling, firearms, nutraceuticals, and various online subscription services. These businesses often deal with high transaction volumes, international sales, or sell products and services prone to buyer’s remorse, which leads to higher chargeback rates.

Businesses operating within these sectors should be cautious when selecting payment processors. Traditional low-risk processors like Shopify Payments, PayPal, Stripe, and Square might terminate merchant accounts if the business falls on their prohibited businesses list. Instead, opting for a specialized high-risk merchant processor such as PayRio can offer more stability, compliance, and scalability, ensuring that merchants can conduct their transactions without disruption.

Challenges Faced by High-Risk Merchants


High-risk industries often experience elevated chargeback rates, which occur when customers dispute transactions and request refunds from their banks. This is particularly prevalent in sectors like online gaming, adult entertainment, and travel. Chargebacks not only cause financial losses but also strain relationships with payment processors, leading to potential account terminations. To manage these, businesses must implement robust fraud prevention systems, maintain clear refund policies, and provide responsive customer service.


Fraud is a persistent threat in high-risk sectors, with businesses continuously trying to outwit fraudsters who exploit vulnerabilities in transaction processes. High-risk merchants must invest in advanced security systems, enforce stringent verification processes, and constantly monitor transactions to mitigate these risks. Such measures are costly and time-consuming but essential for maintaining secure operations and customer trust.

Regulatory Issues

Navigating the complex web of regulatory requirements is another significant challenge for high-risk merchants. Industries such as CBD sales and adult entertainment are subject to strict compliance standards, including age verification and adherence to specific legal stipulations. Failure to comply can result in hefty fines, legal actions, and the loss of processing capabilities, making compliance a critical, ongoing concern for high-risk businesses.

Higher Fees

Due to the increased risks associated with high-risk transactions, merchants in these sectors often face higher processing fees. These fees can significantly impact profitability, especially for startups and small businesses operating on tight margins. Additionally, high-risk merchants may encounter other financial burdens such as setup fees, monthly account fees, and cash reserve requirements, further challenging their financial management.

Businesses operating within high-risk industries should carefully consider their choice of payment processors. Traditional low-risk processors like Shopify Payments, PayPal, Stripe, and Square may terminate merchant accounts if businesses fall onto their prohibited businesses list. In contrast, opting for a specialized high-risk merchant processor like PayRio offers more stability, compliance, and scalability, ensuring that high-risk merchants can conduct their transactions without disruption.

Why Some Processors Avoid High-Risk Merchants

For high-risk businesses, the journey to secure a reliable payment processor is often riddled with obstacles. These businesses find themselves in a relentless pursuit to avoid account termination, a situation that underscores the high-stakes environment they operate in. The reluctance of processors to collaborate with high-risk industries is not unfounded. It stems from a complex web of challenges and risks associated with these businesses.

Brand Association

One significant factor influencing the hesitance of traditional payment processors is brand association. Financial institutions and low-risk independent sales organizations (ISOs) place a high value on their public image. Associating with industries perceived negatively by the public or those involved in contentious sectors like firearms or CBD products can tarnish their reputation. This reputational risk is a deterrent, making conventional suppliers wary of forging business relationships with high-risk entities. They prioritize their image and the perception of potential or prospective customers, opting to avoid any association that might negatively impact their standing in the market.

Operational Risks

Operational risks play a crucial role in the decision-making process of payment processors. High-risk businesses are more prone to chargebacks, which occur when customers dispute a transaction with their credit card issuer. The financial implications of excessive chargebacks are significant, leading to fines, penalties, and potentially, account termination. Furthermore, the underwriting process for high-risk merchant accounts is considerably more rigorous. Financial institutions meticulously assess the risk associated with the merchant’s industry, business model, credit history, and processing history. Any red flags can result in a denial or unfavorable terms, making it a daunting task for high-risk merchants to secure a merchant account.


Compliance issues further complicate the landscape for high-risk merchants. Many high-risk industries are subject to stringent regulations and must navigate a labyrinth of compliance requirements. From age verification in adult entertainment to adhering to complex cannabis laws for CBD merchants, maintaining compliance is both essential and challenging. The cost and effort required to ensure compliance add another layer of complexity for payment processors, making them hesitant to engage with high-risk businesses.

In light of these challenges, merchants in high-risk industries should exercise caution when selecting payment processors. Traditional low-risk processors such as Shopify Payments, PayPal, Stripe, and Square may terminate merchant accounts if the business falls on their prohibited businesses list. Opting for a specialized high-risk merchant processor like PayRio offers a more stable, compliant, and scalable solution. PayRio provides the assurance that high-risk merchants can conduct their transactions without the constant threat of disruption, making it a safer and more reliable option for businesses navigating the high-risk merchant landscape.

Alternative Solutions for High-Risk Merchants

Finding the Right Processor

For high-risk merchants, selecting the appropriate payment processor is paramount. Traditional low-risk processors such as Shopify Payments, PayPal, Stripe, and Square might terminate merchant accounts if businesses fall on their prohibited businesses list. It is crucial for merchants to research and identify processors that specialize in high-risk accounts, like PayRio, which offers stability, compliance, and scalability. These specialized processors understand the unique challenges and are equipped to provide the necessary support, ensuring business sustainability amidst rising chargeback issuances.

Specialized Merchant Accounts

High-risk merchant accounts are designed to meet the distinct needs of high-risk businesses. These accounts often come with benefits such as stronger chargeback protection and the ability to process card payments despite bad credit or lack of transaction history. However, they also tend to have higher processing fees and stricter terms, including cash reserve requirements and longer contract terms. Merchants should thoroughly understand the fees and what their high-risk merchant account entails, taking steps to build business credit or reduce chargebacks to demonstrate improvement to payment processors.

In summary, high-risk merchants have several pathways to secure payment processing solutions that cater to their unique needs. By carefully selecting the right processor, considering specialized merchant accounts, and exploring offshore account options, businesses can navigate the complexities of high-risk payment processing. Partnering with a company like PayRio can offer the necessary stability and support, allowing merchants to focus on growth and long-term success.


Throughout this article, we’ve delved into the complexities and challenges that high-risk merchants face, from higher rates of chargebacks and fraud to stringent regulatory landscapes. It becomes evidently clear that navigating these waters demands a specialized approach to payment processing—one that traditional low-risk processors like Shopify Payments, PayPal, Stripe, and Square fail to offer due to the potential for account termination. This understanding has highlighted the indispensable role of a dedicated high-risk merchant processor, offering an essential lifeline by providing stability, compliance, and scalability for businesses otherwise marginalized by conventional financial institutions.

Choosing the right payment processor is not just a matter of convenience but a critical decision that can define a high-risk merchant’s ability to operate and thrive. In aligning with a processor like PayRio, merchants gain a partner equipped to manage the unique risks and opportunities within their industry, making it safer and more beneficial compared to the precarious relationships fostered by low-risk processors. Contact us to learn about our options for hard-to-place merchants. By harnessing the insights, strategies, and solutions discussed, high-risk merchants can secure the necessary footing to not just navigate their challenging landscape but to progress and expand with confidence and compliance.


What Determines if a Merchant Account is Considered High Risk?

A merchant account may be labeled as high risk for several reasons, including the nature of the business (e.g., selling tobacco or firearms), engaging in international sales, offering subscription-based services, or having limited cash reserves. These factors necessitate the need for high-risk merchant accounts.

What Are the Drawbacks of Having a High-Risk Merchant Account?

The primary disadvantage of a high-risk merchant account is the higher cost associated with merchant services and fees. Businesses with these accounts often face processing fees that are significantly above those of standard accounts.

What Information is Required to Apply for a Merchant Account?

To apply for a merchant account, businesses must complete an application that includes details about the business and the authorized signer. Essential information required includes bank account and routing numbers, the business’s tax ID (EIN), and processing volumes or their estimates.

What Factors Contribute to a Merchant Being Considered High Risk?

Several operational factors can lead to a merchant being classified as high risk, such as processing a large volume of transactions, engaging in cross-border transactions, being a new merchant, having a low credit score, or charging for products or services that will be delivered in the future.