High Risk Credit Card Processing

What Is High Risk Credit Card Processing?

High risk credit card processing refers to merchant accounts for businesses that are deemed “high risk” by banks and payment processors.

These business types have a higher chance of chargebacks and fraudulent transactions, so processing their payments comes with more risk and higher fees.

Some common high risk industries include:

Adult content and services
CBD and hemp products
Crypto and digital currencies
Foreign corporations or offshore accounts
High ticket sales over $10,000
Pharmaceuticals and supplements
Travel and ticketing companies
And more

Because these business types pose larger risks, many traditional merchant services providers avoid taking them on. As a result, these merchants need specialized high risk credit card processing solutions capable of safely handling their payments.

The fees tend to be higher as well with setup fees around $300 or more, monthly fees ranging from $100 to $300 per month, and transaction rates of 3-5% or higher.

The key is partnering with an established high risk payment processor that has the tools, expertise and banking relationships to smoothly facilitate payments for these niche industries.

They screen merchants thoroughly, monitor for fraud, and work to maximize approval rates. This makes the process much easier for merchants.

Common High Risk Industries and Businesses

When applying for a merchant account, some businesses are considered “high risk” by banks and credit card processors. This usually means they have a higher likelihood of chargebacks, returns, or fraud.

Here are some common high risk industries and business types:

Adult entertainment
CBD and hemp products
Cryptocurrency exchanges and wallet providers
Debt collection agencies
Dietary supplements and nutraceuticals
Door-to-door sales companies
Essay writing services
Firearms and ammunition sales
High ticket retailers (over $500 average transaction)
International pharmacies
Investment trading programs
Multi-level marketing companies
Online gaming and gambling sites
Online tobacco and e-cigarette sales
Payday/title loan companies
Pharmaceutical sales
Travel clubs and timeshares
Vape shops and suppliers

If your business falls into one of these categories, you’ll likely need a high risk merchant account. The underwriting process may require more documentation and you’ll probably pay higher processing fees.

The key is finding an experienced high risk credit card processor who understands your business model and can guide you through the application process.

Checking their reputation and reading client reviews is advised before signing any contract.

The Challenges of Getting a Merchant Account

Getting a merchant account as a high risk business can be challenging since most banks are hesitant to work with you due to the perceived risk. However, there are still options to get approved.

Traditional banks are typically risk-averse and unlikely to approve high risk merchant accounts, fearing fraud or chargebacks. Businesses like CBD merchants, vape shops, check cashing services, telemarketers and more may be categorically denied.

Payment processors that specialize in high risk accounts are more understanding of the nuances of higher-risk industries. They have expertise in underwriting and fraud prevention tools to qualify accounts others wouldn’t.

That said, getting approved still requires meticulous preparation, including:

Providing extensive documentation of licenses, certifications, business plans, bank statements, articles of incorporation, etc. Full transparency is key.

Clearly conveying your fraud protection/prevention systems, refund policies, customer screening processes, and risk mitigation strategies. Demonstrating that you operate ethically and have safeguards matters.

Being patient through extra screening steps like site inspections, background checks of owners, and trial transaction periods to assess activity. High risk processors take extra precautions.

Paying slightly higher fees and rates associated with the risk level of your business type, especially when first starting out. Over time these may relax as you prove yourself.

The process can be rigorous, but partnering with specialists focused on your industry streamlines success. Taking steps to reduce perceived risk on your end helps ease approvals too.

Tips for Getting Approved for a High Risk Merchant Account

Here are some tips:

Provide as much documentation as possible upfront to demonstrate legitimacy and transparency. This includes business licenses, articles of incorporation, financial statements, etc.

Highlight risk mitigation strategies you have in place, like implementing Address Verification System (AVS), utilizing fraud screening tools, or requiring CVV codes. Outlining these shows you take reducing chargebacks seriously.

Offer larger reserves or delayed rolling reserves if requested. This shows good faith to processors and helps offset their risk.

Be ready to pay higher fees or rates in exchange for an account. Many providers specialize in high risk clients but charge more for their customized underwriting expertise.

Have a good credit score and history personally and business-wise. While your business is risky, showing personal financial responsibility can help.

Consider getting a secured merchant account by putting up a certificate of deposit (CD) as collateral. This guarantees funds to cover potential losses.

Provide conservative sales projections, especially when starting out. Unrealistic estimates raise suspicions so be transparent.

Get quotes from multiple high risk focused providers instead of large banks that auto-decline. Specialists understand nuances better.

Applying these tips requires effort upfront but pays off through higher approval chances. Being open, responsive and willing to make processors comfortable is key when seeking a high risk merchant account.

Frequently Asked Questions About High Risk Processing

If you have a higher-risk business, you probably have lots of questions about getting set up to accept credit card payments. Here are some common ones:

1. What exactly is “high risk”?

High risk applies to businesses in certain industries like adult entertainment, VPNs, online gambling sites, and more. These businesses are labeled as high risk due to a history of higher amounts of fraudulent transactions or chargebacks.

2. Why is high risk processing more expensive?

High risk processors take on additional risk and liability with these accounts. To offset that, rates and fees are typically higher than low risk accounts. Expect to pay a higher discount rate percentage, account fees, and additional security deposits or reserves.

3. What should I look for in a high risk processor?

You’ll want to partner with a processor that specializes in high risk accounts and understands your business model. Look for good customer service, transparent pricing, integration options, and tools to help keep you compliant.

4. Will I definitely get approved for an account?

Unfortunately, approval is never guaranteed. The processor will likely ask for additional verification documents and assess the level of risk associated with your business before making a decision. Having solid policies and procedures in place can increase your chances.

5. How long does the application process take?

Plan for the onboarding process to take 4-6 weeks. After you submit your application, there is extensive underwriting and review required before the final decision is made. Once approved, integration and testing will add more time before your account goes live.

6. What kind of terms and rates can I expect?

For retail businesses, expect qualified rates between 3-5% and $100-$300 per month in fees. eCommerce accounts will often see rates of 5-8% or higher depending on sales volume and average order value. Terms are typically 12 months.

7. Will I have payment processing downtime when switching?

With proper planning, you can avoid any gaps in processing. Work closely with your new and old processors on timing and consider keeping your existing account open temporarily.

Getting set up with high risk merchant services does require some extra work but is completely feasible if you partner with the right payment processor. Knowing what to expect goes a long way.