A high-risk merchant account indicates that your payment processor has deemed your firm to be more vulnerable to fraud or chargebacks. To compensate for the risk that the payment processor is taking on, high-risk merchant customers pay higher processing costs. This article explains why a merchant account could be classified as high risk and what its implications are for your company. When a payment processor determines that your corporate account is at risk for chargebacks, fraud, or a significant volume of returns, they classify it as high-risk. This could be due to several factors, including the fact that you are a new merchant that has never processed payments before or the fact that your industry is regarded as highly dangerous and has a high chance of fraud.
Although each credit card processing system is different, high-risk merchant accounts will all have higher fees. In general, transaction processing fees will be greater, often more than double those of low-risk merchant accounts. Although low-risk merchants pay a chargeback fee (a cost you pay when a customer challenges a charge directly using their credit card), chargeback fees for high-risk merchants are typically greater.
A high-risk merchant may be required to sign a contract with lengthier terms, pay an early termination fee, or pay a monthly or annual fee. High-risk merchant accounts may be subjected to a rolling reserve, in which the payment processor retains a portion of your earnings until it can confirm that your transactions just weren’t fraudulent or otherwise risky.