The Best High Risk Credit Card Processors

High Risk Merchant Accounts Buyers Guide

What is High Risk?

Let’s begin with understanding “high risk”.

Although the term may sound abrasive at first, don’t let the phrase “high risk” bother you.

There are many reasons why businesses are classified as high risk, and most of them aren’t as “bad” as the term high-risk makes them sound.

We all know that credit card companies (VISA, MC, etc.) want to protect their customers (ie: the people with the credit cards) because they make them the big bucks.

So, these card companies give their customers the ability to dispute fraudulent transactions, make chargebacks on purchases they don’t want anymore, and provide their card holders with whatever peace of mind they need to wield this little piece of plastic.

A little piece of plastic that allows people, in many cases, to spend way more money than they actually have.

So where does risk come into the picture?

What happens when a consumer isn’t happy with a purchase she made and decides to file a chargeback?

The business owner (aka merchant, aka YOU) gets stuck with the bill.

But if that business is no longer solvent, or disappears, then the merchant services provider (MSP) has to pony up the cash to cover the loss.

That’s where “risk” comes into play on the MSP side.

Statistically, some industries are more “risky” than others, like: firearms, bail bonds, marijuanna, etc.

Statistically, some businesses are more prone to fraud, like: businesses who accept payments online when there is no physical person there to verify as the proper card owner, or

Statistically, some business are more likely to have chargebacks, like: businesses who auto-enroll customers into monthly payments after their first purchase

Statistically, some business models are more likely to have chargebacks, like: businesses whose services are subjective in quality .. “I purchased a website from this guy, but I don’t like it at all.”

These are some of the reasons why a business might be called “high risk” and, as a matter of fact, they simply have more chargebacks and more fraud.

It doesn’t make them bad or wrong – just more risky for a merchant account provider to let them wield the power of credit.

So then… What’s a High Risk Merchant Account?

What is a High Risk Merchant Account?

A high-risk merchant account is a payment processing account designed to accommodate businesses that, statistically, are financially less predictable, overly prone to disputes/chargebacks and pose an elevated degree of potential loss to the merchant service provider and bank that supplies them with the technology & infrastructure to accept payments.

When we talk about getting a high risk merchant account, all that really means is finding a company who will give your business the tools it needs to accept credit card payments from your customer, whether in-person or online.

Pro tip: You want this to be a strong partnership. One where the MSP knows your business intimately, and you have a strong relationship with the MSP as well.

The Merchant Account Provider’s Role:

When a merchant service provider (also commonly referred to as a merchant account provider, credit card processor, or simply merchant processor) partners with a business, it serves a few primary purposes:

• To provide the merchant with the hardware, software, and infrastructure needed to accept credit card payments and receive funds for those purchases.
• The MSP interacts with the card companies (VISA/MC/etc.) and banks on behalf of the business. There are a lot of complex moving parts going on behind the scenes when credit card transactions are processed, like authorization, settlement, etc and the last thing a business owner wants to deal with, is more stuff to deal with.
• The MSP acts, in a way, like the business’s financial guarantor. If the business incurs fraud, excessive chargebacks, or refunds it can’t cover, the MSP left having to foot the bill.

In order to provide these services for business owners, MSPs charge fees. No news there. And when merchants are in the high-risk categories, the fees are higher.

Take car insurance for example, if you have a history of getting into a lot of accidents and you drive a really expensive car your insurance fees will be higher than average.

The same goes with merchant accounts. If your business, industry or marketing model is considered “high risk” you will have more limitations, fees, etc. when it comes to payment processing.

So… If high risk merchant accounts are more expensive, why choose one?

Why Choose a High Risk Merchant Account?

Let’s talk for a second about the benefits of high risk merchant accounts.

As a business owner a seemingly logical enough question to ask yourself now is “why would I choose an account when I know the fees are going to be higher?”

Great question.

The best way to answer that question is with this question: How long could your business survive without the ability to accept payments other than cash or check?

In addition to mitigating risk for the merchant account provider, high risk merchant accounts insulate YOU from business risks as well.

Most business owners are unaware of this fact (or completely ignorant to high-risk vs. low-risk in the first place) and will simply choose an MSP that is fast to get setup on and has low fees, like Paypal.

1. Create an account
2. Enter some information
3. Done.

Sounds great, but the problem is really what happens when (not if, but when) something in your day-to-day business operations (or your industry or marketing model at large) flags their system.

Something like:

• Too many chargebacks.
• Any type of fraud.
• A good month (ex: your business has a good month, or runs a killer promo, and does an out of the ordinary amount of transactions or transaction volume).
• Your website gets hacked.
• The MSP changes their policies and you’re no longer within scope.
• Fraud happens to a large competitor in your industry
• There’s increased public scrutiny of your industry or marketing model.
• etc.

And the next thing you know your account is frozen, or closed.

You’re unable to accept credit card payments for a day. Maybe 2 days. Maybe a week. Maybe longer.

Your only recourse is to hop on chat support with someone from India who clearly doesn’t know or care what is going on, and hope that they’ll have the authority to turn your account back on (good luck).

So the real benefits of choosing a high risk merchant account provider (when your business is in fact on the risk spectrum) is that they prepare for all of this before your account is created.

Note: If you're a smaller business, or just getting started, you may want to check out our recommendations for the best credit card processors for small business.

Benefits of High Risk Merchant Accounts

• Underwriting
• The Ability to Expand Globally
• No Volume Caps
• Minimized Chargeback Issues
• Streamlined payment flow

Underwriting

First let’s clear up a very common misconception that 99% of high-risk business owners make. The mistake is opening an account with a company like Paypal, Stripe or Square and thinking they have a merchant account – after all you can accept payments, right?

These companies allow you to use their merchant accounts. They are called merchant account aggregators. They know nothing about your company: what you sell, how you sell it, how you deliver it, if you deliver it.

They bank on the idea that if someone is committing fraud, they can simply shut down the account and freeze your money – happens every day. They let you set up accounts fast, and shut them down even faster.

So, the primary benefit of choosing a high risk merchant account provider, when your business is in-fact on the risk spectrum, is peace of mind that you can continue business operations in the face of fraud, out-of-the-ordinary activity, or a handful of other reasons.

How? With good underwriting.

The biggest “trick” to getting a reliable merchant account is by working with a provider who fully understands your business, and truly wants to work with you.

MSPs who do their proper due diligence to understand you can help protect you. If they know what to expect, they will be much less likely to close or freeze your account when things, inevitably, happen.

Inevitably? Well after all, you are high risk business, so there is a high chance something is going to happen.

Underwriting prepares your MSP, and you, for this inevitability.

High Risk Classification Factors & Examples

There are many factors that constitute high risk. Let’s take a look at a list of some of the high risk factors that may classify your business as a “high risk merchant”.

• Low credit, bad credit, or now credit. This applies to both the business owner’s personal credit score and the credit score attached to the business’s EIN.
• No prior history/experience with accepting credit cards.
• Any history of fraud or illegal activity by the business or business owner on record.
• The merchant conducts business (makes sales) internationally.
• Businesses who sell products/services that constitute “reputational risk”, meaning what they sell is potentially controversial from a PR point of view that banks simply don’t want to be associated with (ex: adult products, marijunana smoking pipes, etc.).
• Highly regulated industries tend to attract more bad actors, or bad actions. When regulations are high, it invites people to break laws to get around regulations (ever seen the Wolf of Wall Street?) These industries have a higher chance of merchants who break laws/regulations and become subject to fines, closure, etc. (ex: alcohol, tobacco, firearms, financial products). Whether your company is doing it isn’t relevant – others in the industry are, which raises a flag for banks.
• Mail-order, telephone-order (MOTO) or online orders/transactions. Basically anytime something can be purchased when the card owner is not physically present, called “card not present” there is inherently a higher risk of fraud, chargebacks, etc.
• High average transaction size. Losses from chargebacks are more severe when the price of the item is expensive (would you rather refund someone for a $5 service or a $5,000 service?)
• History of high chargebacks. Excessive chargebacks fall outside of standard charge-back ratios, and indicate that there’s something off with the merchant’s products/service, customers, customer service, product delivery, sales methods, or all of the above.

In addition to these factors, there are many industries and business models that are considered high-risk by default, whether or not they fit the above list of factors.

If your business falls into one of these categories, you may be considered high-risk.

Potential High Risk Categories:

• Accounting & Tax Prep
• Adult Entertainment
• Alcohol
• Antiques & Collectibles
• Bad Credit, Credit Repair
• Bail Bonds
• CBD
• Coins
• Continuity, Subscriptions, Recurring Billing
• Cosmetics
• Dating Services
• Debt Collection, Debt Consolidation
• Digital Downloads
• Digital Marketing, SEO, Web Design
• Document Preparation
• Dropshipping
• Electronics
• Extended Warranty
• eBay
• eBooks
• Educational Products
• Fantasy Sports
• Firearms, Guns & Ammunition
• Fireworks
• Furniture
• High Average Tickets
• Hotel & Lodging
• Hunting & Outdoor Equipment
• Information Products
• Jet Charter
• Live Events
• MATCH List/TMF Merchants
• Magazine Subscriptions
• Multi-level Marketing
• Non-Profit
• Nutraceuticals and Supplements
• Online Dating
• Online Gaming
• Property Management
• SaaS Companies
• Self-Service/Kiosk Payments
• Skin Care Products
• Smoking Accessories, Cigarettes & Tobacco, eCig & Vape
• Supplement & Nutraceuticals
• Tasers & Stun Guns
• Tech Support
• Telemarketing
• Telemedicine
• Timeshare Litigation
• Tobacco
• Transportation
• Travel & Tour
• Trial & Free Offer
• VoIP & Telecommunications

Note that some of these high-risk categories are quite large industries on their own, and may have individual nuances in their own right when it comes to payment processing.

Some MSPs specialize in these specific niches under the high-risk umbrella. If your business falls into one of these categories, please consider the high risk merchant account providers we have listed below, but also look into our individual review articles for high risk providers by industry/category.

Considerations for Choosing a High Risk Merchant Account Provider

Getting a high-risk merchant account is a two-way street. Most of what we have discussed comes from the side of MSPs evaluating the business for potential risk, but as a business owner there are some things you need to consider when choosing a provider.

After all, if you choose a provider that is the wrong fit for your business, you could wind up paying higher than necessary fees, ending up with an account closure, or being incorrectly added to the TMF list.

Protect your business, and consider these items when making your decision:

Consideration 1: Expertise & track record

How much experience does the MSP have with high risk, your industry, and your specific business type? How long have they been around?

Are they able to give you any specific case studies or expert information about other clients they have worked with to understand some of the common difficulties you might encounter – and help prepare you for them in advance?

Consideration 2: MSP Features

What kinds of features & solutions do they provide in addition to a merchant account? Like gateways, fraud screening, decline salvage, transaction routing, reporting, etc.

Consideration 3: Previous processing history

How much previous history has your business had with processing credit card transactions? Do you have information about key high risk indicators for your business, like your chargeback ratio, volatility of monthly revenue, etc.?

Consideration 4: Flexibility & customization

Is the MSP you are looking to work with able to customize their service offering to your specific needs?

Consideration 5: Rolling Reserves

How much cash do you need to keep in rolling reserves for your account to stay solvent? (more info on rolling reserves here).

Now that you know what things to consider when evaluating your merchant account provider, let’s look at how to prepare for what to expect when signing up.

How to Prepare for Getting a High Risk Merchant Account

Not all merchants get approved for merchant accounts. But, like anything else in business, if you come prepared you will give your new MSP partner confidence that you have your ducks in a row, and make their life (and trust in you) easier.

Do your best to present yourself as helpful as possible and make sure they see you as a credible business person.

Let’s first take a look at the application process, and then our recommendations for what you can prepare to give yourself the smoothest possible ride.

Application Process

Think of the application process as an opportunity to paint a clear, solid picture of your business for the underwriter.

You either need the knowledge to paint this picture yourself , or you need someone to help do it for you – before you submit the application and documents to an underwriter / processor.

You only have one chance to make a good first impression.

Your goal is to have an underwriter pick up your application packet, scan it and quickly evaluate it as a solid, lower risk business – or at least a business model that is very well thought out and constructed.

In addition to the initial submission, it’s incredibly important to know how to interact with underwriters. They’re really just looking for reasons to decline applications, so if you don’t have someone that is working with underwriting departments for you, it’s very important that you tread lightly through this process.

Let’s take a look at what you need to prepare to get this part done right.

Application Preparation

It’s time to prepare for your big moment, so let’s run through some tips that will help you get off on the right foot.

Tip #1: Have skin in the game

As a general rule, underwriters like businesses to have “skin in the game”.

This could be showing that you have a physical location, personal reputation clearly tied to your business, personal investment into the company, inventory, etc.

They want to make sure that you’re committed to your business through-and-through.

Tip #2: Have control over your business

Outsourcing has become the catch phrase of the new entrepreneur. But for the same reason it’s attractive to entrepreneurs, it’s dangerous for processors; it’s “hands off”.

If your entire business is built around a fulfillment house that ships products for you, how much control do you truly have? What happens if that company goes out of business? What will your customers do if they don’t get their product for a week, a month or even longer?

Chargebacks will happen.

The challenge for underwriters is that they now need to consider the fulfillment house as well as your business.

Similar to having skin in the game, do you have an onshore team? Are you responsible for the wellbeing of people’s families that know you and live in your community?

Tip #3: No tricks. Tricks are for kids.

As a marketer, there’s a wide spectrum of ways to market a product or service. These range from “straightforward” to “super tricky” and a great deal of gray in between.

Having free trials that automatically bill your clients after X amount of time (also called “Negative Options”), or auto-checking a box on an order form that puts someone into a monthly recurring charge (also called “Forced Continuity”) – no matter how visible that box is – will lead to confused, upset customers.

Using tricky marketing tactics tends to lead to higher chargebacks. Underwriters don’t like this.

Pro tip: Facebook doesn’t like their advertisers being tricky either. Check out Facebook advertising guidelines for ideas of what to AVOID if you want to stay in the “not tricky” category.

Tip #4: Explain Black Marks

If you had a bankruptcy, have poor credit, have a judgment against you, have no credit or recently had unusually high returns or chargebacks for some reason – offer an explanation up front.

Please note: This is very much a case by case basis and it’s very helpful to have guidance here as each situation varies. Just like with the law, sometimes what you say can work against you.

That being said, if you don’t have guidance, the general rule of thumb here is to offer information so the underwriter (or whoever is preparing your package) doesn’t have to dig for it and come to their own conclusions.

Underwriters review your credit, your business credit, your state and federal organization filings, other processor’s lists and often your bank statements – there’s a lot of information there.

You should assume your underwriter is going to see those “black marks” and make their own judgments if you don’t offer any explanation up front.

Tip #5: “Yes Sir”

Don’t ever ask an underwriter “why” they’re asking for information. This immediately puts them on the defensive.

You want to massage this situation – give them every reason possible to approve your account. If they think of you as an open book, they will inherently have more trust in you.

Tip #6: Be realistic about thresholds

One of the first things underwriters look at is the amount of volume being requested. It’s very common for business owners to get defensive and “tell underwriters” how much they’ll be processing.

A couple important notes:

First, the monthly volume that you list on an application is a request for volume – not a demand.

Second, that number can always be the same or slightly higher than what your current volume is.

But if you don’t have any history or are currently doing low volume and anticipate a big spike in volume, it’s really important to know the correct amount to request & how to get to the volume you need.

For example, If you’re a brand new business or only processing $10,000 a month and you indicate that you’ll be processing a million dollars next month – underwriters will need to see evidence as to why that’s possible.

They’ll also want to see a whole host of information to show that you’re financially stable enough to go on the hook for a million dollars in the next 30 days (tax returns, financials, bank statements etc).

You’re FAR better off putting the most conservative numbers you can on your applications and growing slowly.

Asking for a significant increase in volume from your current level raises a flag for underwriters.

If you’re 100% sure you’ll be growing at that pace, we highly encourage you to work with someone that has experience navigating the underwriting process.

The Best High Risk Merchant Accounts

1. Easy Pay Direct
2. E Merchant Broker
3. SMB Global
4. PayKings
5. Payment Cloud