What are the rates and fees for a high risk merchant account?

Most high risk merchants can obtain a merchant account to accept credit card payments, but the rates, fees and conditions are higher than those that apply to low- and medium-risk businesses. The question is not whether your high risk business will pay more, but rather how much more.

Card-issuing banks charge more to high risk businesses because they incur a higher risk by serving them with a merchant account. The important thing to remember is that if a merchant cannot cover the cost of a cardholder chargeback, the issuing bank is responsible for paying the charge. So, businesses with a higher-than-average rate of chargebacks, businesses in an industry with a higher-than-average rate of chargebacks, businesses with a poor credit history or weak financial foundation, and businesses with a higher-than-average vulnerability to fraud are all categorized as high risk during the underwriting of a merchant account application. 

With respect to processing rates, pinpointing an average is difficult because there are so many variables. The range we see for all-in transaction fees runs from about 2.9% on the low end, to as much as 7% to 9% for extremely high risk operations. Most high risk merchant accounts fall into the 4% to 6% range.

With respect to account fees, high risk accounts usually incur the account setup fees that also apply to low- and medium-risk accounts. High risk setup fees may be higher because the underwriting process is more involved, with underwriters going back 5 years or more to scrutinize your records.

With respect to the terms of a high risk merchant account, the most significant is the requirement to have a reserve account. This account, usually a rolling reserve, amounts to 5% to 10% of the credit card transactions billed over a 180-day period. There are also flat reserve fees capped at a predetermined amount. Regardless of the specific requirements, a reserve fund impedes cashflow and can be burdensome to the merchant.

Many processor fees may be applied to a high risk account, just as they would be to a standard merchant account. Processors apply fees for cancellations, chargebacks, monthly service and a host of other things. The important thing to remember is that many of these processor fees are negotiable, and even for some high risk merchants, can be reduced or eliminated. On the other hand, a regrettable fact of life is that certain high risk businesses may not be able to qualify for a credit card merchant account, even using an offshore processor. But even here, using payment options such as eCheck and ACH will enable such a merchant to conduct business and prosper. 

Our company specializes in helping high risk merchants obtain merchant accounts with the best possible rates, fees and conditions. Our assistance starts with helping you put together information for your application, reviewing various offers, and then assisting you with account setup and ongoing support. Considering multiple offers is very, very advantageous for high risk merchants, since different processors and banks have different levels of interest in supporting various categories of high risk businesses. We have worked for decades with all the top domestic and offshore high risk merchant account providers in every high risk vertical, so you can rely on us to help you find the best overall payment processing solution available. Contact us now to discuss your requirements.

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