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So, your business has been identified as a high risk merchant, for whatever reason. And there are a wide variety of reasons that this could happen, some of which are beyond your control. Generally, here are some reasons why your business may be designated as high risk for credit card processing:

  • New merchants with little or no credit history
  • Poor personal credit history of the business owner
  • Excessive chargebacks
  • Sales are seasonal or inconsistent for some reason
  • Process more than $20,000 per month, with the average transaction being over $500
  • Business is based in a high-risk industry, such as:
    • Marijuana-based stores where legal for medical or recreational use
    • Adult products and services
    • Dating services
    • Magazine subscriptions
    • Casinos or online gambling
    • Software downloads
    • Travel and hospitality
    • Financial Services


Keep in mind that these are just high level guidelines for a high risk merchant designation. What one Merchant Bank determines to be high risk, may not be the same as what another Merchant Bank determines to be high risk. It all depends on the underwriting requirements of the Merchant Bank. One traditional bank may have strict requirements while another has more relaxed requirements.


If your business has been tagged as a high risk merchant, there are some big things you need to be aware of before you go shopping for a Merchant Account. Educating yourself on the ins and outs of what it means to be a high risk merchant will help you make the best decision for your business.



As a high risk merchant, Merchant Banks are liable for any monetary losses from your business. One of the most important factors in determining the risk status of any business is the chargeback ration. Chargebacks occur when a customer is not satisfied with a purchase, doesn’t receive a product paid for, the business closes before delivering a product, or feels something fraudulent has happened with their transaction. A chargeback is processed when a customer contacts their credit card company to refuse a charge due to one of these reasons or a similar reason. And when that chargeback is processed by the Business Bank, the Merchant Bank pays that bill, likely before charging their customer for the unsatisfactory transaction.


For example, Customer A orders a sweater online and his credit card is charged accordingly. However, he never receives a confirmation email and never receives the sweater. Customer A immediately feels like he is the victim of fraud and calls his bank to cancel the transaction based on these facts. This results in a chargeback to the merchant.


This puts an extraordinary amount of risk on the Merchant Bank. This financial liability is one reason why low and high risk designations are given to merchants, to establish a set of guidelines and help protect Merchant Banks. A higher ratio of chargebacks will result in a high risk designation and if chargebacks become a bigger issue, your account could be closed. Often, it is in the best interest of businesses to contact dissatisfied customers and offer full refunds, rather than letting such customer services issues escalate to a chargeback.


Merchant Cash Reserve

A cash reserve is frequently required for new businesses that have no proven track record of transaction history. If a cash reserve is required on your Merchant Account, you will need to pay cash up front that will be held in escrow for you until your business proves a successful track record.


For example, Company A is a new company and has no documented track record of selling any of their products. Therefore, when the business owners goes to set up a Merchant Account, they are required to provide a designated cash reserve. Think of this as a security deposit. The cash reserve is held for Company A until the business performs as expected and proves their worth to the Merchant Bank.


Rolling Reserve Fund

A rolling reserve is sometimes required of high risk merchants. The rolling reserve is built when a Merchant Bank holds back a percentage of funds from the high risk merchants scheduled payment. The rolling reserve is not a surprise to the merchant, as it is agreed upon in the Merchant Account contract.


For example, Company A processes $35,000 in transactions in the month of January. The Merchant Account agreement states that Company A will receive payment from their Merchant Account at the end of each month, minus a 10% rolling reserve hold. Therefore, Company A receives a payment of $31,500. And at the end of the next month (or at the designated interval), the 10% rolling reserve is added to the payment to Company A and a new rolling reserve is held back from the next month’s payment.


High Risk Payment Gateway

A payment gateway is used by businesses to authorize credit or debit card payments. With a high risk merchant, there is a higher fee for processing these payments due to the risk determined to exist. However, in this day and age, credit card processing for your business is a must. The increased fee is a small price to pay for fast credit card processing and deposits into business bank accounts. The Gateway provider is also charged more in return due to the high risk merchant status.


Multiple Merchant Accounts

It’s no longer as simple as having one account to run all of your transactions through, especially for high risk merchants. Multiple Merchant Accounts allow business owners to grow their business seamlessly to customers. Often high risk merchants have a volume cap imposed on their account. With multiple merchant accounts, business owners can use load balancing features of their payment gateway to direct their business transaction traffic to the correct account location and ensure continuity of business operations. With multiple accounts, a high risk payment processing gateway is essential, as it allows reporting and analysis in a single dashboard, while spreading transactions across multiple Merchant Accounts so that growing your business becomes effortless, from a payment processing perspective at least.


Where to Start in Evaluating High Risk Merchant Accounts?

While all of this information may seem overwhelming, rest assured that help is out there. Fortunately, there are payment processing providers out there that specialize in high risk merchants. However, as a high risk merchant, you should expect higher rates than those provided to low risk merchants by a traditional bank.


While there are a number of high risk merchant processing solutions out there, it is best to do your research to make sure you are getting the right fit for your business in the payment processing realm. While these five highly rated high risk payment processing companies come highly recommended, there are other, more specialized high risk payment processors out there that may be a better fit for your company.


One example of such a payment processor and Merchant Account provider is GAM Payments. This boutique payments provider that specializes in high risk Merchant Accounts. While focusing on partnering with selected merchants to deliver top level customer service, GAM Payments prides itself on being transparent and affordable for high risk merchants. The small, dedicated, caring team at GAM Payments will be there to support your payment processing needs. They know the ins and outs of the payment processing industry and seek out high risk merchants to help provide effective solutions and enable business success.


As you can see, high risk merchants need to due their due diligence to select the best Merchant Account provider for their unique situations. Options exist to solve your business payment processing issues and while the big five are impressive, you are a small business for a reason. Consider the personal touches and service available to you from small, boutique providers such as GAM Payments. The transparency of their business model and personal service and attention to detail is worth a closer look for your high risk merchant account solutions.