Every business that accepts credit and debit
cards, which is virtually all of them nowdays,
requires a merchant account. Simply put, a
merchant account is a type of business bank
account that allows the business to accept
electronic transactions–credit and debit cards
(and even some more obscure electronic
The only electronic-based businesses that do not
use merchant accounts use a payment service
provider (PSP.) There are several well-known
PSPs, particularly Square, PayPal, and Stripe.
PSPs don’t offer the full-service that you get
with a merchant account, but typically have
lower costs. Processing rates are typically
flat-rates, which are higher than a merchant
account, but there are cost savings in fewer
fees, typically using pay-as-you-go pricing. The
downside to PSPs is that they’re only good for
businesses with relatively small amounts of
sales (a few thousand dollars per month), they
lack the stability of a merchant account, and
they have much worse customer support than a
merchant account. Typically, if your business is
making even a small-but-decent amount of money,
you don’t want a PSP.
is a High Risk Merchant Account?
A high risk merchant account is, as the name
suggests, a merchant account for a business that
is considered high risk. But what does that
mean? What makes a business high risk, and is it
as bad as it sounds?
Fortunately, it’s not as bad as it sounds. But it
does require special handling.
There are many reasons why a business might be
termed high risk, and they can be very basic and
Location of your business:
There are different places that are
considered riskier than others, primarily
two: the first is a home-based business.
Home-based businesses are typically
considered higher risk because they’re more
likely to fold than a brick-and-mortar
business. The second place that can get you
defined as high risk is if you work in a
foreign country–or even if you do business
with people out of the country. Either of
these are risk factors that a merchant
account will take into consideration.
How Long You’ve Been in
Business: If you’re brand new, no matter how
good your products are, you’re probably high
risk. Financial institutions like things to
be settled and calm, tried and tested. If
you’re a new company, there’s no data for
the financial institution to base their
decisions on. You’ll be high risk.
Your Merchant Account
History: Think of it like your credit
report. If you’ve been with other merchant
accounts and things haven’t gone so well,
you’ll be high risk.
Chargebacks: What’s a
chargeback? A chargeback is when a customer
disputes a charge and the charge is
reversed, returning the money back to them.
These are huge red flags for high risk
businesses. It is far better to solve a
problem through customer service, refunds,
and communication with your customer than to
force them to get a chargeback. A company
with a lot of chargebacks is a major high
risk. And, there are some types of
businesses that experience a lot of
chargebacks, which make them automatic red
flags when applying for merchant accounts.
Some of these businesses include:
Casinos, Gambling or
Adult Entertainment and
Travel, Hospitality, and
Attorneys and Bail
Cigarette, Vape, or CBD
Weapons of Any Kind
Health and Wellness
Your Credit Report: Yes,
you’re applying for a business merchant
account, but if you personally have a bad
credit report it will put your business into
the high risk category.
Does It Mean If I’m High-Risk?
Getting a high-risk merchant account isn’t a
black stain on your permanent record. It just
means that there are some different hoops that
you’ll need to jump through as you work with
your merchant account. For starters, there will
be extra scrutiny before you get approved for
your merchant account.
You will likely have higher fees and processing
rates. There is a chance that some providers may
refuse to do business with you.
That said, it’s not all bad. There are many
benefits to having a high-risk merchant account.
Yes, you’ll have higher fees and increased
scrutiny, but you also get some perks:
More Flexibility: Low-risk
businesses are limited in the types of
revenue they can collect by credit card,
while high-risk businesses have more
freedom. This includes things like offering
recurring payments to customers, processing
higher volumes for special events like
sales, and selling a wider variety of goods
Remember how we said that working
internationally makes you high risk?
Low-risk businesses are very restricted when
it comes to international sales, but by
being high-risk you have much more freedom
to work outside the borders.
Chargeback Protection: When a
low-risk business gets too many chargebacks,
the merchant account gets skittish and may
terminate their account. With a high-risk
account, chargebacks are more expected and,
while they need to be kept to a minimum as
much as possible, your account is less
likely to be suspended.
Do I Apply For a High-Risk Merchant Account?
At TranscendPay, we work with a diversified
network of banks and financial institutions to
provide merchant payment processing services
with no-reserve/no escrow requirements and
minimal transaction fees. Our technology
solutions allow you to integrate our
revolutionary payment gateway into your existing
infrastructure to streamline your payment
Whether you’re a newly formed startup ready to
begin collecting payments, an established
corporation looking for greater flexibility and
transparency in your payment processing, or a
high-risk business trying to set up a high-risk
merchant account without paying crippling fees,
Transcend Pay has the tools and expertise to