Who Needs a High Risk Merchant Account?

If you’re just looking into payment processing services for your business, you may be wondering if you’re classed as a high risk merchant. You may have heard providers talk about “high risk merchant accounts” or services they offer for high risk merchants.

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Many providers claim to specialize in serving the needs of these merchants, but there are also plenty of stories about providers charging outrageous fees and offering poor terms to those they deem high risk. You also know that it’s more difficult to get a high risk merchant account; you are aware that your application could be rejected by a provider.

With all of that in mind, you want to know who really needs a high risk merchant account—and if that group includes your business.

Who Is a High Risk Merchant?

High risk merchants need high risk merchant accounts. That seems simple enough, right? But the real question is who is considered a high risk merchant?

Different payment processing providers, including banks, assess “risk” differently than some people would, so who they categorize as a high risk merchant and who is deemed a low risk merchant can be a little bewildering.

The Usual Suspects

There are a few types of businesses you would expect to be high risk: Anything associated with gambling, such as online casinos are one good example. Other examples include drug paraphernalia shops, which, although popular, do have an inherent risk in that much of their merchandise pertains to illegal substances. Alcohol and tobacco are often considered in this category as well, even though they are legal.

Other “risky business” includes anything sex-related, such as an adult escort service; anything to do with debt or credit repair; offshore enterprises; and anything to do with the supernatural or occult, such as hypnosis or psychics.

The Less Suspected

Some surprising entries also crop up on lists of the types of businesses that are often deemed high risk by payment processing providers. Real estate, for example, is often considered a sound investment, but a real estate business is considered high risk by most merchant providers.

Car dealerships would not strike high on the list of who you would suspect to be a high risk merchant, but they are often classed that way because of their slim profit margins and the risk of chargebacks.

How about airlines and travel agencies? Both of them are classed as high risk merchants by some payment processors. The sale of any kind of subscription-based service, such as a gym membership, a renewing subscription to a social networking site or a magazine subscription, are all considered risky. Financial planning is also considered a risky business.

Why Do You Need a High Risk Merchant Account?

The list of who can be considered high risk goes on and on. In fact, you might think that there are more high risk industries than there are low risk ones, and that might be true. That leads you to ask, “How is risk being assessed?”

There are a number of factors, but some of the biggest are the risks of chargebacks or fraud. Take, for example, an airline. Flights are high priced and can be purchased online or over the phone. Someone who obtained credit card information could quickly and easily buy a whole bunch of flights. The fraudster gets tickets, jets off for parts unknown, and leaves the credit card holder with a rash of fraudulent charges—which the holder then disputes. The credit card company withdraws all the money from the airline’s account. The airline has already provided the flights—it cannot get them back, so it is simply out the money.

A payment processor assesses businesses for factors such as the risk of fraud, and they assess a business as high risk if they believe the merchant needs additional protections.


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James Newman

James brings over 30 years of experience in the telecommunications and merchant services industry to his role as Client Relations Specialist for BNA Smart Payment Systems. With a focus on sales, marketing and client services, the last 10 years have been spent with BNA. He has completed over 2,000 hours of professional business training, including professional sales, solution selling, conflict resolution, appraisal workshop, strategic marketing, and financial analysis. Outside of work, James is almost constantly reading fiction. In direct contradiction to this rather silent interest, he took up the guitar six years ago and regularly, happily, and shamelessly destroys the peace and quiet of his family home.

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