Does My Business Need a High Risk Merchant Account?

Does My Business Need a High Risk Merchant Account?

“Hi, this is Dave from Dave’s Online Vapor Shop, I need to accept credit cards at my business.”

“Hey Dave, this is Ernie from Choice Merchant Solutions. That’s definitely something that we can help you out with – can you tell me about your business?”

“Sure, Ernie. I run Dave’s Online Vapor Shop, we sell electronic cigarettes and accessories over the internet. We just started shipping to customers all over the continental United States!”

“Congratulations, that’s fantastic! Ecommerce merchants are my favorite, but there are a few caveats for your merchant account. Due to the nature of your business, it’s going to be a high risk merchant account.”

“A what? Why is that?”

Every business is different

The specifics of that conversation are fictional, but the content and gist are as real as the screen you’re reading right now.

Business owners and merchants call in and have a conversation about their interest or need for a merchant account. A small percentage of businesses are not eligible for a regular merchant account, and usually apply for a high risk merchant account instead. First, you need to know what one is.

What is a high risk merchant account?

Businesses require a high risk merchant account when they present a higher amount of risk. In this case, a lower chance of actually receiving funds for services rendered or products sold.


This begs the question, ‘What reduces the chance of receiving funds?’

The strongest factor is usually card-non-present transactions. These are transactions where payment is processed without the physical card. Almost everybody has bought something online or over the phone – those are card-not-present transactions. The bottom line is that swiping is the most secure method of authentication for credit cards, and not being able to swipe will raise your risk profile in the eyes of underwriters.

Another factor is credit card processing volume. Since each transaction is potential fraud, higher volume means more chances for fraud. Transaction ticket size also raises risk. Ecommerce and high risk businesses have higher average transactions when compared to retail or brick-and-mortar businesses.

Chargebacks disrupt natural business cycles and hurt cash flows. A chargeback is when a cardholder calls up his card issuer and says, “I didn’t make this purchase.” The amount is refunded, and the business owner is eats the cost of the product or service. Lots of chargebacks is not a good thing, and a high percentage will raise a business’ risk profile.

The Member Alert to Control High-Risk Merchants (MATCH) list, also known as the Terminated Merchant File (TMF) is a list that contains merchants that have been terminated for one reason or another. Merchants on this list will have a very hard time getting a merchant account. The list was designed for merchant acquirers, in order to flag merchants that have caused intense issues in the past.

Time in business is also a factor when determining whether or not a merchant will be high risk. New merchants are more risky. Credit card processing history is something that all merchant services providers look at when determining rates, fees, and the type of account.

Business credit matters, but not as much as you’d think. Business credit doesn’t have too much impact on a transaction, but it can raise your risk profile if it is too poor.

High Risk Merchant Account Industry Types

Industry type is probably the most important factor an underwriter looks at when approving a new merchant account. Businesses in these industries (or similar ones) will most likely be approved for a high risk merchant account.

  • Mail Order
  • Catalog Order
  • Travel Services
  • Tobacco/e-cigarettes
  • Adult
  • Credit Repair/Debt Consolidation
  • Pharmaceuticals
  • Nutraceuticals
  • Dating Services
  • Trial Offers

It’s important to remember that this is a spectrum – if your business is on the edge, you may be bumped up or down, it’s up to the underwriter. Your rate will also vary depending on the above factors.

If you’re not sure if your business will need a high risk merchant account, please call us at 860.296.1300 or email us at, and one of our high risk merchant account specialists can give you a quick answer and a free quote.

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