A Complete Guide to High-Risk Credit Card Processing

Processing credit cards may be a tricky business because many companies have plenty of chargebacks. Certain sectors with an element of risk might cause significant problems for processors if income is reduced or companies are forced to close their doors. Credit card processing companies have adopted a “high risk” categorization to handle clients with bad credit, poor processing records, or insufficient cash flow. High-risk businesses face higher rates and fees and more stringent terms and conditions. 

What can you do if you think you’ve been categorized as high-risk? This article will tell you all there is to know concerning high-risk credit card processing and high-risk businesses.

What is High-Risk Credit Card Processing? 

To accept credit card payments, a company must first open a business account with an acquiring bank through sharkprocessing.com. The fee for this service tends to vary significantly depending on various factors, including the type of industry, how transactions are conducted, and the risk of loss in the past. High-risk companies have higher fees, and a dedicated payment processor is generally required. Processors often avoid these “risky” businesses due to the potential risks. The most significant risk posed by high-risk businesses is the increased chance of chargebacks, which is just one of the factors that makes them a concern.

Certain variables, such as the type of product or service given, the average monthly dollar amount for sales, the locations to which the business sells, and others, can dramatically raise the possibility of chargebacks, putting banks and processors at risk of millions of dollars in potential losses. High-risk status is a bank’s (or processor’s) defense against the threat of a large number of chargebacks, but too many chargebacks might deem a business high-risk. Due to the industry in which they work, some may even be designated as high-risk.

What is a high-risk business?

A company is classified as high-risk for various reasons, but the two most prevalent are that it operates in a high-risk industry and faces the danger of monetary failure. If you sell firearms or weapons, for instance, you would come under the first condition. Some industries, like those involved in the e-cigarette industry, have a high rate of chargebacks, making them financially unstable. If a small company has a yearly processing revenue of less than $1.2 million, it might be regarded as high-risk.

How to determine if you’re high-risk? 

As previously stated, various factors might influence whether or not your company is considered high risk. For instance, if you’re a new business with no or bad credit in a risky industry, many processors would view you as a high-risk business.

The following are some examples of high-risk businesses:

  •    E-Commerce
  •    Anything adult-oriented on the internet
  •    Tobacco\Gambling
  •    Services in the financial sector
  •    Legal assistance
  •    Hospitality and travel
  •    Well-being and health
  •    Software
  •    Calling cards
  •    Affiliate marketers
  •    Life coaching
  •    Consumer electronics
  •    Telemarketing

High-risk designations can be used by unscrupulous credit card processing providers to charge customers extra rates and fees. A company’s credit card processing capabilities could be removed due to a high-risk designation; therefore, it’s critical to understand what goes into the decision to label your company as high risk to verify it’s a legitimate decision.

Credit Card Processing in High-Risk Industries

While most credit card processors maintain a similar list of high-risk businesses and sectors, the terms and conditions related to a high-risk designation vary significantly depending on the supplier. A high-risk category usually entails higher credit card processing fees and varied rolling reserve targets, tiered pricing schemes, and a liquidated damages clause.

Transaction rates, fees, and merchant accounts are expected to be impacted in the following ways by high-risk industries and businesses:

•          Fees

When you’re labeled high risk, expenses like configuration, payment portal fees, chargeback fees, and other fees are likely to be higher, potentially decreasing your profit margin.

•          Rolling reserve

A rolling reserve may be established for high-risk merchants. The credit card processor keeps a portion of your daily transactions and then releases it. It gives the processor peace of mind if your company fails or if a substantial innovation negatively impacts your corporation. Typically, credit card processors keep 10% of your transactions for 90 days before distributing them to you.

•          Minimum reserve

A minimum reserve, similar to a rolling reserve, is a portion of your transactions that the credit card processor requires you to keep in your account at all times. A fixed sum must be met, either in a single lump sum or as a percentage of transactions over time. Always maintain a minimum reserve.

In some circumstances, there is little that can be done to prevent the high-risk classification. Companies that trade in the cannabis market, for instance, are inevitably classified as high risk due to the federal restriction of cannabis and the sector’s potential legal instability. Businesses in other sectors might avoid being classified as high-risk by guaranteeing that there are mitigating measures in place that put credit card processors at ease.

Choosing a High-Risk Credit Card Processing Company

Do your research on high-risk credit card processing services to reduce risk. Go for a business that specializes in your field. For example, there are high-risk business account providers who specialize in working with pharmaceutical and healthcare businesses. After you’ve narrowed down your selection of providers, go over their policies thoroughly. A monthly service fee and also a higher per-transaction fee may apply to your business account. If the processor considers your enterprise to be high risk, you could be charged as much as 5% for every transaction.

Although mandated costs will play a large role in your decision about which high-risk credit card processor to choose, you should also consider the processor’s other solutions. Another thing to think about is the agreement terms. You should never sign a long-term contract that locks you at a high rate for a more extended period. Your company’s demands are likely to alter over time, and you might be suitable for better deals soon.


It can be challenging to choose the best high-risk merchant. Every situation is different, and some high-risk designations might carry different rates, fees, and conditions. However, remember that you must not enter into a long-term contract that keeps you in a bond at a high rate for a long time frame. Your business needs might change over time, and you may be able to find better rates in the future. So always conduct proper research to avoid risk.

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