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High Risk Merchant Account

What is a high-risk merchant account. Or what is meant by high-risk merchant account.

“In today’s business world being able to accept card payments is almost as important as breathing. For most businesses cash is king and can be the life force, the tipping point of whether a business survives or not. By not being able to accept card payments in all the necessary formats can in most cases result in a painful demise of the business alongside other things.
“So…… obtaining card facilities to accept payments. Seems simple enough. I’ll Go into my local bank and request a chip and pin machine (PDQ) or the necessary software to connect my payments to my bank account (Virtual Terminal or E-commerce Gateway). Right!? “ It shouldn’t be any harder than that surely…

In most case it is really is that simple but in number of cases it can prove to become really difficult and highly frustrating with lengthy applications and required documentation, “unfortunately we won’t be able to help, your business is classed as a high risk merchant account”


In reality there is a number of businesses which pose no financial risk what so ever to the owner. In fact they are highly profitable and when trading consistently remain profitable even in times of recession.

So why is that the bank have classed my business as high risk merchant account, I need to take card payments to be in business that doesn’t make sense? The answer is simple really. It’s not that your business is a risk to you as the owner but your business posses as a risk to the acquiring bank who will be processing your transactions.

If we have learnt anything it’s that banks hate risk!

The model and safeguards you apply to your business to ensure that your not exposed to risk i.e customers not paying in time or particular terms and conditions that allow your business model to work best for you can put banks in a risky position. There are a number of other reasons that are set out by the card schemes (visa, Mastercard etc…..) and each has industry specific characteristics.

  • Multi-level marketing
  • ISP or web hosting services
  • Software downloads
  • Mail order / Telephone order
  • Supplements
  • Claims Management
  • Webcams
  • Electical Appliances
  • Telecommunications
  • Wealth Creation
  • Property Investment
  • Collection Agencies
  • Alcohol Sales
  • Dating
  • Direct Marketing
  • Car rentals and sales
  • Home-based businesses
  • Interactive games
  • Payday loans
  • Forex Exchange
  • Travel Agents and Tour Operators
  • Online Gambling as lotteries bingo Casino
  • Gambling (traditional) bookmakers

What a number of these businesses have in common is lengthy time frame from payment to the actual product and service being delivered. Customer complaint issues due to poor services, automatic re-new practices which catches some customers off guard and also legal requirements such as anti money laundering regulations have some industries presented as high risk to the bank.

“You take a payment in January for a service that will be delivered and completed in June if anything goes wrong between then, such as you decide to close the business or are unable to provide the service. That money would need to be be refunded.

So if you haven’t got the money the bank would be liable to pay it back. And how much did you say the average transaction was £10,000. When faced with a customer forcibly recalling their money back from their credit card or debit card due to an unfavourable service, this is known as a charge back. Any business with the possibility of a chargeback is a problem for the banks. Fraudulent details can also constitute in a chargeback which can cause problems for both merchant and the bank involved.