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High risk merchant accounts: What you need to know

High risk merchant accounts: What you need to know

If you’re a new business, you have a bad credit rating, or your industry is considered risky, you may need a high risk merchant account in ord

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If you’re a new business, you have a bad credit rating, or your industry is considered risky, you may need a high risk merchant account in order to take card payments.

And to compensate for the increased risk that your payment processing provider is taking on, you’ll pay higher fees for the privilege.

But how do you know if you’re a high risk business? What makes it different to a low risk merchant account? And how do you open a high risk merchant account?

This page will explain everything you need to know and list our pick of the best high risk merchant account providers. 

Or if you’re ready to start processing credit card transactions with a high risk merchant account, you can compare quotes today using the form above. To get started, we just need a few details about your business. 

>See also: Best payment processors for UK small businesses – 11 of the best

Which industries are considered high risk? 

Industries are generally considered to pose a high risk to the payment processor if there’s a greater potential for fraud, failed transactions, legal issues, or payment disputes. These can result in chargebacks, which costs your provider. Examples include:

  • Gambling 
  • Travel 
  • Adult entertainment and products
  • Drugs, supplements, and natural remedies
  • Tobacco and vaping
  • Payday loans
  • Debt management
  • Insurance
  • Online auctions
  • Online dating 
  • Subscription and membership services
  • Jewellery and other high value assets

Sectors like travel and subscription services might sound relatively harmless compared to the likes of gambling and payday loans, but not for a payment processor. 

For example, a customer might change their mind in the time between booking a holiday and going on holiday, or it may have to be refunded due to unforeseen global events (just think about the effect of Covid). Likewise, it’s not uncommon for customers to forget to cancel a subscription or to unwittingly sign up and then demand a refund. 

What businesses are considered high risk? 

Regardless of which industry you work in, your business could still be considered high risk. 

The criteria can change from provider to provider, but, generally speaking, a payment processor might find your business high risk if:

  • You’re a new business that’s never taken card payments before
  • You deal in high-value transactions 
  • You trade internationally, especially in countries where fraud is more common
  • You trade in multiple currencies 
  • You have a low credit score 
  • Your payment processor terminated your merchant account due to a high volume of chargebacks

Bear in mind that it’s not you who decides whether your business is high risk. Your merchant account provider will assess your risk profile based on the documents you provide for your application. Also, it’s entirely possible for your business to change from low to high risk if your circumstances change.  

> See also: 6 of the best payment systems for accepting US dollars

High risk vs low risk (how do they compare) 

Unlike high risk businesses, low risk businesses present a much lower risk of fraud or chargebacks to their payment processor. As you’re safer to work with, you’ll have a greater variety of merchant account options to choose from and your fees will be lower. 

You’ll probably be able to open a low risk merchant account if:

  • You’re an established business 
  • You have a good credit rating 
  • You deal in low value transactions (under £50 on average)
  • You have a consistently low volume of transactions (you take less than around £15,000 a month)
  • You only deal with domestic customers
  • You only deal in one currency 
  • You operate in a low risk industry such as hospitality, everyday goods, or professional services 
  • You have a history of low or no chargebacks or returns 

You should be aware that there are no hard and fast rules here: even if you work in a high risk industry, you may still be able to secure a low risk merchant account if you can demonstrably meet some of the criteria listed above. Likewise, if you work in a low risk industry, but you process a lot of high value transactions, you may be considered high risk.

High risk merchant account fees

Fees are the main tangible difference between a high and low risk merchant account. You’ll probably face a higher fee to set up your merchant account, and then you’ll pay roughly 4-10% on every transaction compared to around 1-2% for a low risk account, which can have a serious dent on your margins. You may also have to pay a monthly maintenance fee. 

You’ll also probably have to wait longer for payments to arrive in your account. To reduce the chances of a chargeback, your settlement period could be up to a week compared to an average of about three days for a low risk account. 

What if I have a bad credit rating? 

Having a bad credit rating is no barrier to opening a high risk merchant account – in fact the risk is literally priced in. 

However, having a bad credit rating doesn’t mean you have to settle for the larger fees of a high risk merchant account. You have two options: 

Firstly, you might find it easier to sign up with one of the newer breed of payment processing providers. Stripe doesn’t run a credit check on applicants, and Square only runs a soft credit inquiry, which doesn’t affect your credit score. 

The best thing about these providers is that they charge one low, flat, predictable transaction fee on every sale you make. Stripe charges 1.4% + 20p for European cards, and 2.9% + 20p for international cards. Square charges between 1.75% and 1.9% for European cards, and 2.9% for non-European cards. 

Your second option, if you want to be able to open a low risk merchant account, is to improve your credit rating by paying your debts and invoices on time, managing credit cards responsibly, and making sure your business information is up to date in Companies House. This is by no means an immediate process, but as discussed above, it’s entirely possible to transition from high to low risk. 

How do I get a high risk merchant account 

You can apply for a high risk merchant account online by providing your preferred provider with the correct documentation and supplying some key business information. You’re likely to need the following:

  • A summary of your business and what it does
  • Details and identification for your company’s owners/directors
  • Details of your credit history 
  • Financials including average or expected monthly value of card transactions and average transaction value 
  • Details of any previous merchant account you’ve held 

Requested information and documents can vary from provider to provider but will certainly include the above. 

But it’s not just about them assessing you – you should take the time to properly scrutinise any merchant account provider you consider opening an account with. You should especially look out for the following:

  • How do their fees work? Not all providers are completely transparent about their fees up front, but you can still get an idea of how they work or get a quote and establish how much they’re likely to cost you so you can get a range of quotes and compare providers 
  • Do they have a good reputation? There are countless merchant account providers, and some can promise very low fees, but are they a reputable company? A low bar to clear, of course, is simply name recognition, but you should also see whether they work with other businesses in your sector 
  • Are they secure? At a minimum your provider should be compliant with the Payment Card Industry Data Security Standard (PCI). You should also check whether they have fraud prevention tools and a chargeback prevention system, as well as data encryption tools and protocols to protect your sensitive financial information
  • What support do they offer? A good merchant services provider should be able to offer a variety of support options, so that if something goes wrong, you know you can reach someone quickly via phone, email, or live chat 

Best high risk merchant accounts 

With the above in mind, it’s time to discover who we think are the best high risk merchant account providers currently operating. 

We’ve used the above criteria to pick three high risk merchant account providers. 

Instabill

Instabill actually started life as a predominantly high risk merchant account provider in London in 2001, specialising in online gambling, online dating and adult businesses. It has since widened its remit, but its long history in the high risk space makes it an excellent choice for your business. 

All Instabill’s banking partners adhere to industry standard guidelines set by Visa, MasterCard, and American Express, and it operates substantial fraud protection measures through these partners, including SSL certificates and 3D Secure processing. It also has offshore and international banking partners, which can help to minimise the impact of overseas trading restrictions, and allows it to process payments in nearly any currency. 

Finally, we like that it has live customer support, so you can talk to a merchant account manager directly if you encounter any issues. 

Compare high risk merchant account quotes

Total Processing 

Founded in 2016, this Manchester-based company is a relative newcomer to the payments space. However, that puts it in a good position to bring a disruptive and progressive approach to high risk merchant accounts. 

Total Processing specialises in working with businesses operating in high risk industries, including CBD oil, foreign exchange, gambling, and events. To manage risk, its payment gateway is equipped with Hotlists, which denies payments from risky emails, places, and devices, as well as flexible card verification and security tools. 

It also operates its own fraud prevention system that can verify transaction data and settle payment disputes, and gives you an overview of all your business activity through a CRM dashboard. 

Total processing has an excellent 4.9 rating on Trustpilot. The only downside is that it’s almost impossible to find any information on fees, pricing, and contract terms without getting a quote. 

Compare high risk merchant account quotes

ccNetPay

ccNetPay specialises in high risk merchant accounts, and advertises itself as catering to adult, escort, dating, pharmaceutical, and gambling businesses. 

It’s also very transparent about its fees and fee structure, so you can understand exactly how much you’re going to be paying before you sign up. High risk transaction fees for EU or UK businesses start from 2.75%, and you’ll also pay around €950 in annual bank fees, a setup fee of €100, and a monthly fee of €20. These fees are quite high compared to some other providers, but you can be approved for your merchant account in around 48 hours. 

Also, if you do business in the EU, ccNetPay could be the provider for you – it has partnerships with a number of European acquiring banks, allowing it to offer a high risk, direct European merchant account. 

Compare high risk merchant account quotes

Ready to open a high risk merchant account? Compare providers today by answering a few simple questions using the form at the top of the page. 

All pricing information is accurate as of 20th June 2022.

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