High-Risk Merchant Accounts

Credit card processor for high risk businesses

We’re experts in handling high-risk merchant payment processing for a variety of high-risk industries, both big and small. Where low-risk providers turn their back, we welcome you with open arms, ready to help high-risk businesses get approved and stay approved. 

We work hard to get you approved for a high-risk merchant account and then we work with you to help you lower your chargeback ratio and help you prevent fraud.

Bankcard was referred to me by my developer. From the jump, they were impressive. They were super responsive, they asked great questions and their solution was really robust. Also, working with Katherine and Hanna is a dream!
High risk merchant account
Emily Wallace
CEO

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Table of Contents

As a modern business owner, it is essential, even crucial to have the ability to accept and process credit cards. This ability allows you to conduct business online, to receive credit card payments in your stores and shops, and makes other payment processing options available to you as well, such as:

 

It adds a layer of convenience customers appreciate and helps you keep your business competitive within the local marketplace and on a larger scale. If you’re hoping to expand and/or grow your business, merchant accounts that offer credit card processing are the way to go.

But, it’s important to understand a few key details about the way these merchant account providers view your business—and what this means for your business. Most merchant account service providers are highly risk-averse. They assess businesses based on the risks they represent and may deny their services to your business or label your business as high risk based on a number of criteria.

If they designate you as a “high risk” business, it means they believe your business poses a greater financial risk. This determination is often based largely on the risks certain businesses and industries experience for things like:

  • Fraud
  • Chargebacks—perhaps you’ve had excessive chargebacks in the past or operate in an industry with higher than average chargeback rates
  • Acceptance of recurring payments
  • Bad personal credit
  • Processing multiple currencies
  • Operating in industries widely designated as “high risk”
 

Of course, you want to know why these things matter to merchant services providers. The bottom line is they often prefer things to go off without any hitches.

It’s not only a lot more paperwork when chargebacks occur, or fraud charges are levied. It also costs credit card processing partners money to deal with these matters. The lower their risks of chargebacks, disputes, etc. taking place, the happier they are to extend you their services at reduced rates and with relaxed requirements.

High-Risk Merchant Account Categories

high risk merchant account

One thing that is important to remember is that not all merchant service providers have the same criteria for listing a business as “high risk.” What may qualify you as a high-risk merchant with one provider may not with others. However, these are some high-risk categories that commonly warrant the designation. If one or more of them applies to you or your business, you may find many credit card processors consider your business high risk and schedule your fees and other requirements accordingly.

  • Offshore businesses operating in the United States or U.S.-based businesses operating internationally
  • Products or services that are of questionable legality, including adult products, drug paraphernalia, vape and e-cigarette products, etc.
  • Questionable sales and marketing practices (MLM and pyramid marketing, for instance)
  • History of excessive chargebacks
  • High risk of fraud
  • Bad personal credit

With many merchant service providers, their objectives involve minimizing their own risks. They do this by being selective in the merchants they do business with or by assessing higher fees and other requirements for those they deem “acceptable risks.”

While this industry is always growing and changing, we’ve spent thousands of hours getting the following types of high-risk merchant accounts approved:

High-Risk Merchant Account Industries

high risk merchant account

In addition to the categories mentioned above, businesses in certain industries, may also be listed as high risk merchants with most payment processors. These high risk industries include:

  • Downloadable Software
  • eBooks
  • E-Commerce
  • Electronics
  • Firearms & Ammo
  • Foreign Exchange Market
  • Financial Services
  • Furniture
  • Gambling/Gaming
  • Health Clubs/Weight Loss
  • Insurance
  • Jewelry
  • Legal/Personal Injury
  • Magazine Subscriptions
  • Marriage Services
  • Moving Company

High-Risk Credit Card Processing Fees

If your business falls into a category associated with high risk merchant accounts, it may be no fault of your own. That doesn’t change the fact that you need to move forward with realistic expectations of what is to come for your business. The one overriding reality is that high risk accounts cost more than those that aren’t identified as high risk accounts.

Unfortunately, you’ll generally pay a considerably higher amount for the same services as low risk businesses. Some of the “penalties” you’re required to pay as a high risk merchant include the following:

  • Higher account fees
  • Higher processing fees
  • Lengthier contract requirements (while you can negotiate, many providers require three years to begin with that includes an automatic renewal clauses extending the contract in one-year increments afterward)
  • Early termination fees
  • Fewer pricing options (while many businesses prefer interchange-plus pricing plans for payment processing, high risk merchants may only have the costlier tiered pricing options with some providers)
  • Rolling reserve requirements that limit your available cash flow
  • Transaction limits (some providers limit the number of transactions you can process in a month while others limit the dollar amount of transactions you can process)
  • Increased chargeback fees

It’s not all doom and gloom when it comes to high-risk merchant accounts. There are some benefits to keep in mind with these types of accounts, as you can do business with an international audience, something low-risk merchants are unable to do. That doesn’t change the fact, though, that you do pay more for the privilege.

Managing Chargebacks

Chargebacks are public enemy number one if you’re attempting to move out of the high risk category with your merchant services provider, especially since most chargeback laws are created with the consumer in mind, not the merchant. One of the most important things you can do is to actively seek ways to reduce the number of chargebacks that occur within your business.

Here’s something you may not know about chargebacks: roughly 86 percent of chargebacks, nearly nine of every 10, are the what is known as “friendly fraud.”

What is “friendly fraud?”

First, it’s best to look at the other two types of fraud that occur when it comes to chargebacks:

  1. Merchant error
  2. Criminal fraud

Merchant errors that lead to chargebacks may include things like poor customer service, failing to respond to customer complaints, failing to issue refunds after returns are made (which occurs in 15 percent of chargeback cases), and failing to properly display terms for returning defective merchandise.

Criminal fraud is something many payment processors are taking active measures to curtail. If you establish policies and participate in fraud prevention for your business, in addition to investing in equipment that uses the latest fraud detection and prevention technologies, you should be able to reduce criminal chargebacks within your business as well.

Of course, that leaves friendly fraud, which is basically an honest mistake. Friendly fraud is when a customer initiates a chargeback out of confusion, forgetfulness, etc. Like when a customer agrees to a subscription service but were unaware of what they were agreeing to and see charges on their statement that they don’t remember signing up for.

These are chargebacks you can prevent by displaying specific return instructions in highly visible spaces on your business website and in your store. In fact, print them out on every receipt so your customers leave with the information they need in hand.

Other things you can do to prevent friendly fraud is to kick your customer service game up a notch or two. Deal with customer complaints and go the extra mile to make sure your customers feel as though their concerns are being heard and that you want to correct the problem rather than leaving them feeling as the only recourse they have is to dispute the charges.

High-Risk Merchant Services Providers

Of course, even if you’re in one of the high-risk industries identified above or you’ve been identified as a high-risk merchant for some other reason, you still need a merchant services provider.

Not just any merchant services provider will do, either. You need to take your time, explore your options, and look for a high-risk merchant services provider that will best benefit your business by dealing fairly with you. Unfortunately, some payment processors and merchant service providers engage in predatory practices. Investigate the company you’re considering partnering with as thoroughly as they investigate you to determine suitability for a high-risk merchant account.

  • Visit their website
  • Look for independent reviews of their services
  • Explore their reputation for dealing with merchants, such as yourself
  • Read the contract—better yet, go over the contract with your attorney to determine its suitability for you and your business

Negotiate, if there’s any wiggle room to do so, for shorter terms, lower fees, and smaller reserve requirements. You may not be able to get all the concessions you seek, but you might be able to work a little extra breathing room into the equation for the sake of your business.

At the end of the day, Bankcard is here to help businesses like yours grow. Bankard can help high-risk businesses get approved for merchant accounts when many others cannot. Plus, we don’t just get you approved. We work with you to make sure you stay approved, by matching you with services that are willing to work with you as a high-risk business. We have a 98.7 percent approval rate for helping high-risk businesses like yours get the merchant services you need.

Whether you’re involved in a high-risk industry or have other reasons for being identified as such, we believe we have the right service, the right knowledge, and the right tools to help you grow your business. Contact us today to learn more about the many services we have to offer high-risk businesses.

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FAQs: Table of Contents

Accepted Industries and Countries​

The industries we accept for high risk merchant accounts include, but are not limited to the below industries.

  • Adult merchant account
  • Bad credit
  • CBD
  • Credit Repair
  • MLM
  • Nutraceuticals
  • Payday loans
  • Private airlines
  • Subscriptions
  • Travel
  • Vape & eCig
  • Illegal business activity
  • Businesses without the proper license
  • Illegal drugs (CBD with less than 0.30% THC is acceptable)

Bankcard can provide merchant accounts to customers in the below countries. Kindly note that many payment solutions are regulated based on location.

  • Andorra
  • Austria
  • Bear Island 
  • Belgium
  • Bulgaria
  • Canada
  • Channel Island
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Faroe Islands
  • Finland
  • France
  • Gibraltar
  • Greece
  • Greenland
  • Hungry
  • Iceland
  • Ireland
  • Isle of Man
  • Israel
  • Italy
  • Latvia
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Malta
  • Monaco
  • Germany
  • Netherlands
  • Norway
  • Portugal
  • Romania
  • San Marino
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom
  • United States
  • Vatican City

Being a start-up business will not hinder a business from getting approved for a merchant account. While having a processing history helps your likelihood of getting approved,  the lack of processing will not necessarily stop you from getting an approval. Consult an experienced Account Executive today to learn more. 

There are never guarantees when it comes to the approval of a merchant account. However, we do work with merchants that have low credit scores. Reach out to an Account Executive today for a consultation. 

If you’re a United States citizen applying for a merchant account for a United States registered business, a social security number is required. 

A merchant account can be labeled high risk for many reasons. You can be labeled as such due to high average tickets, being in an industry that historically has high chargebacks, or an industry that tier one banks do not support.

Applying for a merchant account

To apply for a high-risk merchant account, you need to complete our pre-qualification form and upload all required documentation. Once the pre-qualification is complete your Account Executive will locate the best placement for your account, and send you a final agreement. Once that final agreement is signed, underwriting will complete a full package review for approval. 

There is no fee to apply for a merchant services account with Bankcard. However, If you get approved with us there may be a small setup fee for your gateway account.

Square, Stripe, and Paypal are all payment facilitators and do not accept high-risk merchant accounts. Signing up with Bankcard gives you a direct merchant relationship with a sponsor bank. The approval process requires more documentation, but you’re at a significantly lower risk of getting terminated.

This depends upon how quickly you, the merchant, completes our pre-qualification form. Once we have all of your documentation, we get to work. We can typically locate placement for your merchant services account in 48 hours.  

Once you get an approval, you’ll be able to accept credit card payments within 24 business hours. 

Depending upon the program, you will receive your funds anywhere from 24 to 72 hours after the batch is settled. 

The industry type is a major determining factor when it comes to risk levels of merchant services. But, other factors such as credit, card-present vs not present, and chargeback ratios can also push an account into the high-risk category as well. 

Completing the Application

Your legal business name should match the business name on the state business registration or licensure. However, if you are a sole proprietor, your name would be the legal business name. 

If you’re not sure how much processing you’ll do, we recommend applying for $5,000 to $10,000 monthly. You don’t need to hit that number each month, but if you’re close to going over, reach out to your Account Executive for assistance. 

Your average transaction amount should be the average of all transactions you would accept with your merchant account. Your maximum transaction should be the anticipated maximum amount accepted in one transaction. If you attempt to process a transaction that is higher than the maximum amount provided, additional proof of purchase may be requested. 

You may provide personal bank statements in lieu of bank statements if your business bank account is new or does not have any activity. 

If you’re applying for a merchant account for ecommerce processing you will need a fully functional website with products or services listed with associated pricing. 

Yes, a credit check is required in order to obtain a high-risk merchant account. Once a final agreement is signed, a hard credit pull is done.  Credit scores are taken into consideration when underwriting reviews a full application for merchant services. 

If you’re a United States citizen applying for a merchant account for a business registered in the United States, your social security number will be required to apply. 

Documents

The first step to applying for a high-risk merchant account is completing the pre-qualification form. Three months bank statements, three months processing statements (if applicable), a voided check or bank letter, and driver’s license or passport will be required to apply. 

If your business does not utilize checks, we can accept a bank letter that includes your full account and routing number as well as the business or account holder’s name. The letter should be on bank letterhead, be dated within the last 30 days, and be signed by a bank representative. 

If you don’t have three months of business bank statements, don’t fret. We can accept three months’ personal bank statements from a business owner, or director. 

Bank statements show a lot about a prospective merchant, namely, processing activity, and the average monthly ending balance. If a merchant is currently processing, we want to know why they’re switching, if we know a merchant’s pain points we can find better solutions for their needs. The average monthly ending balance is also relevant to show financial stability within the business as well as validating the monthly volume requested.

If a merchant is currently processing credit card payments and successfully managing a merchant account this can increase the likelihood of getting approved. Some payment facilitators such as Paypal, Stripe, and Square might not supply monthly processing statements. Underwriting may request login credentials so they can get an overview of the processing activities. 

Equipment and Gateways

For in-person retail card acceptance, Bankcard can provide equipment that will arrive programmed and ready to accept payments. Discuss your equipment options with your experienced Account Executive.

Here at Bankcard, we do offer our own gateway solution that’s exclusive to merchants that sign up with us. Of course, if there’s a gateway you prefer we are willing to work with you as long as integration is possible. Please reach out to your dedicated Account Executive for details. 

Bankcard integrates with NMI, Authorize.net, and more. For specific gateway integration questions reach out to an experienced Account Executive. 

Your merchant account will be set up to accept Mastercard, Visa, American Express, Discover, and ATM cards. 

Load balancing is the strategy of spreading transactions over more than one MID. It’s not necessary for all high-risk accounts, but can be considered as a way to manage chargeback ratios with high-risk merchants. 

Existing Merchant Accounts

Not to worry, this number can be increased as needed. However, the bank underwriting your merchant account needs to be aware of the expected monthly volume to ensure they have capacity available for all merchants processing with that bank. 

If you go over by a small amount you might be asked for a copy of the invoice or receipt. However, if you go over the monthly limit by a large amount there is a chance your excess funds might be held temporarily. 

When it comes to high-risk accounts, banks ideally want chargeback ratios below the 3% threshold. If you can provide long term processing history the bank may take this into consideration. Lower chargeback ratios are ideal. Consult your knowledgeable Account Executive for assistance in lowering your chargeback ratio. 

Rolling reserves are a way to financially protect the processing bank from potential losses from chargebacks or refunds. Not all high-risk merchant accounts require a rolling reserve. The risk department will determine if and when a rolling reserve is required. 

Interchange fees refer to the issuing credit card brand fees such as Mastercard, Visa, Discover, and American express. These fees vary depending on the card type, American Express tends to be the most expensive card to process. Interchange rates can range from 1% to 2.5%. 

Of course! Once you’ve established a healthy processing history, you may reach out to your Account Executive for a rate review. We recommend only doing this if your processing history shows low chargeback ratios and relatively low refund activity. 

You may request an increase in your monthly volume at any time. However, it’s recommended to wait until your merchant account reflects healthy processing history as well as financial stability from your bank statements. 

Reach out to our support team, or your dedicated Account Executive for any account-related updates you may need. 

Depending on the program your merchant account fees are either taken at the beginning of each month. Some programs require daily discounts. Program details will be notated on your final agreement and if you have further questions you can always consult your Account Executive. 

ACH payments

Bankcard can assist with ACH or eCheck services. An application and approval process still applies to this service, or it can be an added service with your processing account. Reach out to your Account Executive for details. 

The approval process requires less documentation than applying for a merchant services account. And if you’re already processing with Bankcard an approval can be expedited. 

Every account is different, however, most programs allow next-day settlements for ACH transactions. 

ACH payment acceptance can be integrated into most website platforms. Reach out to a dedicated Account Executive for more information. 

Pricing and Approval

High-risk merchant accounts are priced higher than low-risk accounts because fewer banks are willing to work with businesses labeled “high risk”. Banks also need additional financial protections from loss on these accounts.  

Bankcard will always provide fair pricing based on the risk level of every merchant. And if a current processing statement is provided we’ll do everything in our power to beat the merchant’s current rates. 

While we love working with merchants that are considered high risk. There are limitations put in place by bank and card brand rules. If a merchant does not abide by the specific program rules described by the Account Executive assisting them we cannot ensure an approval.

Think of merchant accounts as a loan or a line of credit. And processing banks take on the risk of transactions getting charged back. Banks can end up liable for the actions of merchants, a problematic merchant can damage the reputation of the bank funding and processing the transactions. 

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