Updated June 6, 2022

High Risk Merchant Credit Card Processing

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High-risk merchants can expect higher fees, but you don't have to settle for second-rate service. Here are the 5 best high-risk merchant account providers.

High-risk merchant? It may be tough to find a processing provider (and more expensive).

But don't worry.

The 5 reputable merchant account providers in this guide specialize in high-risk processing. You're sure to find a good fit no matter what industry you're in.

Read on for everything you need to know about high-risk processing. Plus, find out what businesses are considered high-risk and which providers work with cryptocurrency.

What is a High-Risk Merchant Account?

A high-risk merchant account is one that works with businesses with a higher risk of chargebacks, fraud, or failure.

These businesses are often rejected by standard merchant accounts because of the risk to banks. A high-risk merchant account will accept the risk and allow you to process credit cards. But in exchange, the fees are usually higher.

They're also more equipped in dealing with the unique needs of high-risk businesses. This is why it's important to find the right provider that understands your business.

What Makes You a High-Risk Merchant?

You may think high-risk merchants are mostly businesses that sell shady products, but that's not true. High-risk merchants include:

  • Industries with a high risk of chargebacks and fraud (over 2%)
  • Industries with high rate of failure
  • Industries that require a lot of legal regulation
  • Subscription businesses with recurring billing
  • If you have bad personal credit
  • If you previously had a failed business
  • If you have large ticket transactions (over $500)
  • Very high volume businesses (over $100K per month)
  • If you accept foreign currencies

Some common high-risk businesses are: travel companies, auto parts and accessories, health supplements, financial services, and adult entertainment.

Adult entertainment industry categories use NAICS and SIC codes. The NAICS and SIC codes are numeric codes used to identify a firm's primary business activity. Merchants in the adult industry will use the code that matches their business type best since there aren't enough adult-specific categories.

See if your business is included in the list below.

Businesses Considered High-Risk
  • 1-800 chat sites
  • Adult Industry
  • Airlines and Booking
  • Auto Warranties
  • Background Checks
  • Bad Credit
  • Business Consulting
  • Business Opportunities
  • CBD & Cannabis Products
  • Coins and Collectibles
  • Continuity Billing
  • Credit Monitoring
  • Credit Repair
  • Dating
  • Debt Collections
  • Fantasy Sports
  • Firearms
  • Gentleman's Clubs
  • Government Grants
  • Health and Beauty
  • High-Ticket Coaching
  • Magazine Sales & Subscriptions
  • Male Enhancement
  • Membership Organizations
  • Multi-Level Marketing
  • Nutraceuticals
  • Online Gaming
  • Pawn Shops
  • Pay-Day Lenders
  • Skin and Hair Care
  • Subscription Boxes
  • Tour Operators
  • Travel & Vacation Services
  • Vape & Cigarettes
  • Web Design and SEO
  • Weapons (of any kind)

Best High-Risk Merchant Accounts

To choose the best high-risk merchant account providers, we looked for these criteria:

  1. Specializes in working with a variety of high-risk businesses
  2. Great customer service with real account managers
  3. Free no-obligation quote
  4. Wide range of services

1. PaymentCloud

Best overall for high-risk businesses

  • Personalized customer service
  • Accepts new businesses
  • Quicker approvals
  • No fees disclosed

Founded in 2015 in Southern California, PaymentCloud has developed a strong reputation for specializing in high-risk merchants.

Whether you're in a risky industry or previously had a failed business, they have experienced staff who know how to work with your unique needs. You get a dedicated account agent who will stay with you the entire life of your account.

PaymentCloud uses their 10+ banking relationships to help you find the right fit and the best rates.

They focus on fraud and chargeback prevention to help you stop chargebacks before they occur. Their dispute detection and prevention software can be integrated into your merchant account.

Dharma (one of our favorite low-risk providers) refers merchants they can't accept to PaymentCloud.

2. Soar Payments

Best for: High-risk eCommerce businesses

  • Reevaluate rates after 3-6 months
  • Accepts bad credit
  • Open to matching lower offers
  • Doesn't support non-US businesses
  • Doesn't accept ultra high risk merchants
  • No fees disclosed

Soar Payments specializes in high-risk merchant accounts for online businesses. It stands by three guarantees for all clients:

  1. You will get an instant quote when you submit your application online.
  2. You will get the minimum industry pricing.
  3. You will always speak to a real person based in Houston, TX.

Some business types that Soar Payments specialize in are: financial and legal services, health & beauty, fantasy sports, firearms, tobacco & vape, travel, SEO/SEM, and SaaS.

Soar will also accept business owners with low personal credit. But you may not be approved if your credit score is less than 500.

After 3-6 months of stable processing history, Soar may reevaluate your merchant account and see if you qualify for reduced processing rates or account fees. To qualify, it's important that you maintain a low chargeback ratio.

Soar does NOT support: any illegal activities, adult entertainment, cannabis products, bitcoin, debt collection, gambling, and pharmaceuticals.

3. Durango

Best for: International businesses

  • Multi-currency merchant accounts
  • Offers offshore accounts
  • Supports crypto processing
  • No fees disclosed

Founded in 1997, Durango is one of the oldest high-risk merchant account providers. It works with several banks and processors worldwide to help you find the best fit. This makes Durango great if you have international customers or even a business abroad.

Durango specializes in multi-currency merchant accounts. This allows a customer from another country to see prices and make payments in their home currency.

Durango even offers cryptocurrency processing. You can accept digital coins in-store, online, and via invoice. With over 4 million crypto transactions per day, this allows you to tap into an expanded revenue stream.

You get a dedicated account manager who will stay with you over the lifetime of your account. And you will get a direct number to their line, so you can get in touch without jumping through hoops.

4. Host Merchant Services

Best for: Interchange-plus pricing; no termination fees

  • Interchange-plus rates only
  • No contract
  • Can qualify for free equipment
  • Only one bank sponsor
  • No fees disclosed

Host Merchant Services (HMS) is mostly known as a traditional merchant account provider. But it also supports high-risk businesses that other providers may turn away.

The good thing about Host Merchant Services is that it offers interchange-plus pricing to high-risk merchants (instead of the standard-tiered pricing that most providers offer). This can help keep your processing costs lower. You'll have to talk to HMS to get a personalized interchange-plus quote for your business.

In general, HMS offers:

  • No contract or early termination fees
  • Locked-in rate for the life of your account
  • Most merchants qualify for a free mobile reader or terminal

Host Merchant Services also prides itself on its 24/7 customer service. There are no holds - a live person based in the U.S. will answer your call within 3 rings.

HMS specializes in nonprofits, automotive-related businesses, hotels, fitness, medical and veterinarian offices, firearms, and construction. It may also be able to support other typically high-risk industries as well through its partnership with Electronic Merchant Systems.

Most high-risk providers partner with several processors to help you find the best fit, but HSM is only sponsored by Wells Fargo. This could mean that you may not be approved if Wells Fargo turns down your type of business.

5. SMB Global

Best for: Adult, CDB, and other ultra-high-risk merchants

  • Accepts ultra high risk merchants
  • Supports offshore merchant accounts
  • Processing rates may be higher
  • No fees disclosed

SMB Global is a specialized high-risk merchant account provider. It's one of the few providers that support "ultra-high-risk" industries.

Some examples are adult, gambling, nutraceuticals (including cannabis products), coins and precious metals, debt collection, and offshore businesses. These types of businesses are often turned away, even by other high-risk specialists.

SMB Global has over 15 domestic and international banking relationships. This allows them to find the best custom solution for you.

SMB Global is more suited for online risk-high businesses. It offers 2 payment gateways - NMI and Authorize.net. It has over 175 online shopping cart integrations, as well as developer APIs for full customization.

5 Things to Know About High-Risk Processing

If you're considered a high-risk merchant, finding a processing provider can be difficult and pricey.

Here's what to expect when it comes to high-risk processing:

1. Not All Providers Will Work With You

A lot of merchant account providers will not accept high-risk merchants. So, don't waste time applying with the wrong provider.

The best thing to do is to find a company that specializes in high-risk accounts and your unique needs. Stick around to the second half of this guide for our top 5 providers.

If you know your business is in a high-risk industry, don't sign up with processing service providers like Square or Stripe. There's no approval process, but they can shut down your account without warning once they see you're selling prohibited products.

2. You Will Have Higher Processing Rates

Your rates will likely be higher than standard rates. The higher rate is to offset the risk of you not paying the chargebacks or your business failing.

You'll need to talk to an agent to get a personalized rate. But in general, a high-risk business can expect processing rates to be 3.5% - 5%, depending on what end of the risk spectrum you are.

Ultra-high-risk industries can even see higher rates (i.e., nutraceuticals, adult industry, vape, e-cig, cannabis, firearms, and subscription boxes).

3. You May Get a Tiered Pricing Plan

Ah, the dreaded tiered pricing. Usually, we would never recommend this pricing structure as it's more expensive and not transparent.

Unfortunately, tiered pricing is common for high-risk merchants. With this structure, all your transactions are categorized as either qualified, mid-qualified, or non-qualified. Each tier has a flat-rate processing fee.

Most transactions will fall under mid-qualified and non-qualified tiers. So, if you're shopping around, it's more important to compare those rates.

It also doesn't hurt to ask if you can get interchange-plus quotes during negotiation. This pricing model will help you save some money.

4. You Will Have Stricter Terms

A lot of merchant account providers now offer month-to-month billing with no contract. But high-risk merchants most likely won't be given that flexibility.

You'll probably have to agree to a long-term contract (the standard is 2-3 years). And there'll be an early termination fee if you cancel before the end date.

You may also get a lower monthly processing volume to start. As you build a trustworthy relationship with your provider, you can get it increased.

5. You Most Likely Need a Reserve

A reserve is a portion of funds set aside to protect the merchant bank. In case you don't pay your chargebacks, funds from the reserve can be used to cover them.

A lot of high-risk merchant accounts require a reserve. You may need to provide a certain amount of money at the beginning of the agreement (an upfront reserve) and/or have a portion of each deposit held back (rolling reserve). Either way, that's a portion of your funds that you can't use.

Now that we've got some of the basics down, you may be feeling intimidated. Don't worry. A good provider will work with you to help your business grow.

Benefits of a High-Risk Merchant Account

With all those downsides above, is a high-risk account really worth it? Here are some good benefits:

  • Your account won't be at risk for termination if you have a higher number of chargebacks.

  • High-risk merchant accounts place a greater emphasis on fraud prevention and detection, to help you lower chargebacks.

  • There are less restrictions for selling internationally or processing large volumes, so you won't be limited in your growth.

  • High-risk accounts usually assign you a dedicated account manager. You can work with someone who really understands the unique needs of your business.

Applying As a High-Risk Merchant

High-risk merchants will need to undergo a more rigorous manual underwriting. You will not be instantly approved. It will typically take 2-5 business days to review your business documents and come up with a custom agreement.

For a smooth underwriting process, the best thing is to be prepared. Have ready:

  • Proof of business: Business license, articles of incorporation or organization, or DBA registration.

  • 3 months of previous processing history: The provider will look at your statements to see your processing volume, chargeback rate, and refund rate. These factors will be used to analyze your risk.

    Usually, providers want to see a chargeback ratio of 1% or less. But for high-risk businesses, it's more acceptable to have a chargeback ratio as high as 3%.

  • 3 months of bank statements: This helps the provider see how good you are at handling your business finances, your average balance, and if there are any red flags on your bank account. For new businesses, you can submit 3 months of personal bank statements instead.

  • Voided business check: You'll be asked to provide a voided check of where you want the credit card payments to be deposited into.

  • Supporting documents: Providers may want a deeper understanding of how you operate your business. Also, have these ready:
    • Business plan
    • Billing policy
    • Shipping procedures
    • Guarantees and warranties
    • Refund and exchange policies
    • Inventory reports
    • Security procedures (especially for online stores)

By preparing these ahead of time, you'll have a smoother application process and be ready to hand over anything else the provider may need.

What to Consider When Choosing a High-Risk Processor

Besides fees and contract terms, here are some things to consider as you're shopping for a high-risk merchant account:

  • Alternative payment methods:
    Consider all the ways you plan on taking payments: in-person, online, contactless, invoicing, auto-recurring billing, by phone, ACH transfers, or even crypto.

    The provider should offer the hardware and software for you to take payments however you want.

  • Fraud prevention solutions:
    As a high-risk business, it's super important to prevent and detect fraud so you reduce chargebacks. The provider should provide tools to help you stop fraud before it happens.

  • Room for growth:
    Your provider should be able to meet your changing needs as your business grows. For example, if you have international expansion goals, choose a provider that accepts foreign currencies.

Can I Use Square for My High-Risk Business?

Square is one of the most popular processors for small businesses. It doesn't require an approval process. You just directly create an account yourself on the website. It also offers simple flat-rate pricing, no monthly fees, and no contract.

You may think it's the easier and cheaper way to start processing too. But unfortunately, as a high-risk merchant, third-party processing service providers (like Square, Stripe, and PayPal) are not the best option.

You may be able to sign up with no problem. But because you were not evaluated for risk beforehand, you'll be examined more afterwards.

PSPs prohibit most high-risk categories. They tend to hold or freeze your account if they see suspicious activity. And if they see you're selling products that violate their terms, they can even terminate your account with little warning.

Getting your account terminated can place you on the MATCH List (or Terminated Merchant File). That's pretty much like having a DUI while trying to apply for a license. It can make getting approved for any merchant account hard down the road.

Tips to Reduce Chargebacks

Having lots of chargebacks is one of the reasons why merchants get placed into the high-risk category. Not only are chargebacks costly, they make you riskier, and thus incurring higher processing fees.

It's important to reduce and prevent chargebacks before they happen. Here are some tips for chargeback prevention:

  • Use an address verification service:
    An address verification system (AVS) verifies that the billing address entered matches the address on file on the cardholder account. If they don't match, then the transaction is declined. This is one of the best ways to detect fraud due to stolen credit cards.

    Plus, if a customer disputes the charge, proving that you had a full AVS match will be strong evidence in your favor for fighting against the chargeback.

  • Set up your merchant account correctly:
    A lot of disputes occur because the customer doesn't recognize the merchant name on their credit card statement. This is easy to prevent - make sure the billing statement text is set to your store name or website domain.

  • Sign up for fraud alerts:
    Many providers will alert you if they detect a suspicious transaction. If it seems shady to you, hold off on fulfilling the item. The best thing to do is immediately issue a refund before it becomes a dispute.

    Have a clear return policy:
    Your return/exchange policy should be clearly stated on your website and/or receipt. Make sure your customers can reach you easily to settle returns among yourselves. Prompt customer service can go a long way in avoiding disputes.

  • Train staff:
    Believe it or not, employee error is one of the biggest reasons for chargebacks. Give proper training to your staff on how to enter orders properly, identify potential fraud, and use other verification tools.

Bottom Line

If you're labeled a high-risk merchant, don't panic. You may need to jump through some extra hoops, but there are plenty of providers that specialize in high-risk processing.

Be prepared for higher rates, account fees, stricter contract terms, and reserves. But it still doesn't mean you need to get ripped off. The providers on our list have good reputations for dealing with high-risk merchants, so you know you're in good hands.

Anna G is a contributing writer at CreditDonkey, a credit card processing comparison and reviews website. Write to Anna G at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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