High-Risk Merchant Accounts: Do You Really Need One in 2026?

If you run a high-risk business, you can reduce the odds of having your application rejected or your funds frozen if you apply for a high-risk merchant account.

These accounts are provided by specialized payment processing companies. They allow merchants with certain profiles or in risky industries, including pharmaceuticals, cannabidiol (CBD), tobacco, or alcohol sales, to accept payments without worrying about immediate holds and freezes. However, these accounts often come with higher fees due to their advanced risk level.

In this guide, we’ll explain exactly what a high-risk merchant account is and when a business needs one. We’ll also cover a high-risk account’s pros and cons, and point you to providers that offer them to merchants

Key Takeaways

• A high-risk merchant account is a type of merchant account that lets risky businesses (or companies in risky industries) accept online, credit card, and debit card payments.
• Several things make a company high-risk, including high chargeback rates, being a new business, being financially unstable, and having a high average transaction value.
• Some of the main challenges of using high-risk merchant accounts include strict underwriting, rolling reserves, delayed settlements, and higher fees.
• When evaluating high-risk merchant accounts and payment processors, consider reputation, experience, transparency, fees, and customer support.

What Is a High-Risk Merchant Account?

A high-risk merchant account is a payment processing service for businesses that standard providers consider too risky to work with. They allow these businesses to accept credit card payments, online transactions, and other types of electronic payments.

All providers have different policies for what they consider high-risk, but they will take into account the type of product or service the business sells, its credit history, the average transaction value, the transaction type (online, international, etc.), and the likelihood of chargebacks

How High-Risk Merchant Accounts Manage Risk

There are several ways that these accounts manage risk for high-risk merchants.

1. Many processors use rolling reserves to protect themselves. Rolling reserves are a financial hold in which a processor retains a percentage of merchant sales (often 5-15%) for a set period (typically 6 months) to cover potential chargebacks. These reserves are usually applied monthly, but the frequency depends on your payment processor agreement.
2. High-risk merchant accounts may have delayed settlements. Instead of your funds being available a day or two after a sale, some processors may delay releasing them for a longer period (possibly a week or more) to monitor the transactions, verify they’re legitimate, and manage risk.
3. Strict underwriting, advanced fraud prevention, and monitoring tools are also tapped by merchant account providers to limit their exposure.

It’s important to be aware of these measures as a high-risk merchant, so you’re not surprised when a portion of your sales is held, your settlements take longer than you initially expected, or contract approval requires additional paperwork.

What Makes a Business High Risk?

There are no set guidelines for what makes a business risky. It all depends on each provider’s standards and comfort level. For example, some are comfortable working with a brand-new company in any industry, while others only work with established businesses in certain industries.

The following factors can lead a business to be considered high-risk:

Age of the company

If a business is brand-new, it’s seen as riskier by merchant account providers. Many new businesses fail, and even if they don’t, it takes a while before companies become financially stable.

Also, new companies have no evidence of profitability and no business credit or financial history. Some providers are willing to work with them, but many prefer to work with companies that have experience and a long track record of successful transactions.

Financial stability

Companies with poor financial stability or bad credit history are often classified as high risk. If you’ve defaulted on loans or have infrequent sales, a low credit score, or costs almost as high (or higher) than your revenue, some providers won’t work with you. If you don’t have business credit, providers may consider your personal credit history.

Reputation of the industry

Some industries are considered high-risk by default. These industries are either heavily regulated, incredibly volatile, have controversial products, or are prone to fraud and other shady activities (more on this in our examples section). All of these factors increase the risk that providers take on. Even if your business has no issues, you’re often guilty by association.

Your business’s track record

Working in a “safe” sector by no means guarantees your business won’t get hit with the “high-risk” label.

In fact, “merchant underwriting is less about the label and more about loss predictability,” said Azimul Hoque, an ACCA-qualified accountant and Chartered Financial Analyst (CFA) with over eight years of experience in the financial services industry.

If your company itself exhibits frequent refund mismanagement, inconsistent settlements, long customer fulfillment timelines, dubious marketing claims, a lack of pricing transparency, or other issues, it may be deemed high-risk by payment processors.

Chargeback frequency

Chargebacks occur when customers dispute a purchase with their bank or credit card issuer (instead of the merchant directly) to get their money back. They’re a hassle for businesses and merchant account providers alike, often a sign of fraud or subpar products or services, and perhaps the single biggest red flag during underwriting or ongoing merchant account reviews.

As a result, if your business experiences frequent chargebacks, merchant account providers might consider you high-risk.

Average transaction value

The larger your average transaction, the riskier your business appears to a provider. This is mainly due to larger purchases having a higher chargeback risk. Also, if fraud occurs, it’s much less impactful if the amount is $10 or $20 than if it’s $500.

Changes in business patterns

Keep in mind, the term “high-risk” is dynamic. It’s not a fixed label, meaning your business could initially avoid it only to later trigger concerns, advanced provider scrutiny, and penalties.

“The issues usually arise well in advance of official thresholds that merchants learn about online,” Hoque said. “A chargeback ratio approaching 0.6–0.75% often triggers internal monitoring, even though the official limit is 1%. Sustained ratios above 1% can lead to reserves, pricing increases, or account termination. So can concerning fraud to sales ratios of more than 1%, especially when paired with expensive transactions and international traffic.”

Sudden spikes in sales volume can also lead to issues.

“Even legitimate growth can be viewed as risky if controls haven’t matured,” Hoque said.

Examples of High-Risk Sectors

Businesses in certain sectors are more likely to be deemed high-risk than others. Here are some examples of typical high-risk sectors:

• Adult entertainment
• Alcohol
• CBD
• Charities
• Gambling
• Health and wellness
• Insurance
• Luxury goods (watches, jewellery, designer)
• Nightclubs and bars
• PayDay loans
• Pharmaceuticals (prescription drugs)
• Pyramid selling
• Software
• Subscription-based products or services
• Ticketing and events
• Tobacco
• Travel and tourism

While the specifics vary, merchant account providers generally consider a sector high-risk if it’s known for high chargeback rates, card-not-present transactions, big-ticket pricing, or delayed fulfillment. They’re also cautious when an industry poses reputational risk to financial institutions or faces legal and regulatory scrutiny.

Operating in one of these sectors doesn’t automatically qualify as high-risk by all merchant account providers. Each provider has different criteria for what they consider high-risk, so applying for a standard account can be worth a try.

The Challenges of Using a High-Risk Merchant Account

Here are a few of the most common challenges of using a high-risk merchant account compared to a traditional one.

Higher costs

First, the costs of high-risk merchant accounts are greater than those of traditional accounts because providers are taking on additional risk.

For example, credit card processing fees generally range from 1% to 4% for traditional merchant accounts. However, high-risk payment processing fees range from 4% or 5%, up to around 10% in some cases.

Other fees may also be more expensive. For example, while a chargeback fee from a traditional provider is normally between $10 and $50, high-risk providers may charge up to $100.

Stricter contractual conditions

High-risk merchants also need to deal with more conditions and stricter terms to protect the provider. This may include regular account reviews, large early termination fees, penalties, rolling reserves, or longer contracts.

While these challenges make life more difficult for your business, they’re generally a small price to pay to accept card payments and increase your customer base.

Longer settlement period

High-risk merchant accounts often have longer payout wait times than standard accounts to reduce the risk of chargebacks. With a high-risk account, you’ll typically have to wait at least a week to see your money, compared to the standard one to three business days.

Choosing the Right High-Risk Merchant Account

There are several things to consider while evaluating your options for a merchant account provider.

Experience in your industry

First, you should look for a provider with experience working with companies like yours. If the company has worked in your space before, it may have tailored solutions to fit your needs and understand the obstacles your company faces. The company also may have more knowledge about how to comply with regulations in your industry.

While there are no rules against working with providers who aren’t experienced in your space, you may end up stuck with a company that doesn’t understand your situation as well as you’d like.

Reputation

Next, look for a reputable provider with a positive track record. While many company websites feature testimonials and other positive feedback, take time to check out third-party resources, too.

Look closely at ratings and reviews, and read about the experiences that other companies had with the provider. Try to find one with consistently solid reviews and minimal negative feedback. Be sure to note any concerning trends, such as issues many reviewers had with the same provider.

While it might take a few hours, doing your homework on the various options ensures you’ll end up with a high-quality provider. Conversely, if you choose a company without consulting any testimonials or feedback from other businesses, you’re taking a major risk.

Security features

With high-risk merchant accounts and companies being more prone to fraud, you have to choose a provider that takes security seriously. Make sure to read about its payment security features and ensure it has strong measures in place to protect data from breaches and mitigate fraud.

This includes encryption, firewalls, multi-factor authentication, chargeback prevention, and fraud detection monitoring tools. Ensure the provider complies with all regulations in your area and keeps up to date on security-related best practices.

Customer support

If you’ve got an issue with your account, you’ll want a quick and helpful resolution. As a result, make sure you know the quality of support the provider offers. Look for 24/7 support and multiple ways to reach out for help.

The inability to accept credit card or online payments for several hours or even days as you wait for assistance is incredibly frustrating and could cost you hundreds, if not thousands, of dollars. In addition to a monetary loss, your brand reputation may take a hit if customers complain about their inability to make purchases or spread the word about your issues.

To understand the support the provider offers, call, email, or message them to see how quickly they respond and how helpful the response is.

Transparency

“When advising high-risk businesses, I focus far more on stability and transparency than headline pricing,” said Hoque. “The main risk is … abrupt freezes, unannounced rolling reserves, or cash-trapping contract clauses.”

Your contract should clearly state all fees, terms, conditions, and how long the agreement is for. It should also disclose how a provider handles disputes, calculates reserves, determines reserve release timelines, and whether settlement delays are fixed or discretionary.

“The ones that are clear are super important,” Hoque said. “Termination conditions, reserve release schedules and frequency of account reviews, all these things should be clearly understood by merchants.”

If you’re confused about anything in the contract or want a second opinion, reach out to a professional.

How each provider stacks up against the competition

While checking reviews and ratings is great, you should also do your own research and compare fees across providers. Transaction fees are the most common, but there are other fees you’re responsible for paying. This includes monthly, chargeback, setup, incidental, and termination fees.
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It’s important to know how much you’ll pay for each of these fees with every potential provider, even if you never expect to get charged them. Also, compare services and features to find a partner that matches your needs.

Compatibility

Lastly, ensure the provider you work with is compatible with the tools and solutions you already use. This ensures the setup goes smoothly and that there are no unexpected interactions or issues when accepting payments.
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For example, if your front-end technology, such as your online platforms or payment gateways, isn’t compatible with your merchant account/processor, it may experience problems or not work at all.

Most providers offer a list of what they’re compatible with, but if you’re curious, don’t hesitate to reach out and ensure a provider is compatible with your existing technology. Also, if you operate a global business, you may need to consider international high-risk merchant accounts.

How to Qualify for High-Risk Merchant Services

Before your business can use a high-risk merchant account, it must prove it qualifies for the service. To up your approval odds.​

• Have adequate documentation. “Many retailers are unable to describe their income flow,” Hoque said. “Prepare proper financials, clearly document fulfilment and refund processes, reduce chargeback exposure before applying, and be transparent about volumes and growth plans.”
• Increase security protocols. Underwriters may also look for factors such as strong website security, secure API connections to payment gateways, the implementation of real-time fraud detection tools, 3D Secure 2 (3DS2) enablement, and additional verification for cross-border transactions.
• Strengthen customer service and billing procedures. Ensure refund and cancellation policies are prominently displayed on your website, receipts, and invoices. Ensure it’s easy for customers to find support phone numbers and email addresses. Aim to issue refunds within three to five business days. If you’re a subscription-based business, send renewal notices and enable self-service cancellation.
• Stay present during the application process. After you apply, expect a careful, thorough review of everything you submit, and be ready to answer questions or submit additional materials if needed.

High-risk merchant services pre-application checklist

Here’s a quick checklist to help ensure you’ve done what you need to do before you apply for a high-risk merchant account:

• Have a business plan (for new or fast-growing businesses)
• Gather financial documentation (bank statements, tax returns)
• Check business credit
• Establish a clear refund and cancellation policy
• Document your fulfillment process
• Show a stable transaction history (where possible)
• Implement suitable fraud controls
• Use transparent and honest marketing language
• Ensure PCI compliance
• Utilize clear billing descriptors
• Make sure contact and support information is available to customers
• Display terms of service and privacy policy on your website

Examples of High-Risk Merchant Account Providers

If you think your business needs a high-risk merchant account to process card transactions, here are a few providers you can work with:

• Worldpay: a leading provider in the industry, Worldpay caters to all types of businesses, large and small, low and high-risk. It offers both pay-as-you-go and contract-based processing services. You can read more in our Worldpay Review.
• PayPal: PayPal is a merchant account provider for online businesses, though its Zettle by PayPal service can also be used for in-person selling. It offers contract-free payment processing with transparent pricing.
• ccNetPay: With a focus on high-risk international businesses, ccNetPay is a good choice for businesses that sell in the EU, as it partners with leading European banks.

However, consider the structural differences between different providers to choose the right one for your needs. For example, aggregators like PayPal pool risk and can rapidly freeze accounts, while dedicated high-risk acquirers underwrite individually and may offer greater stability.

Ultimately, you need to decide whether convenience or long-term reliability is more important for your business.