High-risk credit card processing can be difficult to understand.

But if your business exists within certain industries, or if your credit is less than desirable, you might be considered high risk to some credit card processors. But what exactly is high-risk credit card processing and how do you know if it applies to you? In this post, we’ll cover all of the above, and what to do if you fall into the category of high-risk merchant.

What exactly is a high-risk merchant?

High-risk merchants are businesses that credit card processing companies deem “risky” and often refuse to work with. Whether or not a business is considered high risk is determined by a variety of factors. If you’re in an industry that typically experiences a high number of chargebacks, such as the e-cigarettes, then you might be considered risky. Maybe you’re considered a less than family-friendly business — existing in the adult entertainment, gambling or firearms industries. Issues such as bad credit can also affect your “risky” or not status. Being an online business, since there is a higher risk of having your customers’ data stolen, can also cause you to gain a risky status.

You may also be none of these, but just simply a new business, which has the potential to brand you with this label. Though we know everyone has to start somewhere, it can be harder for younger businesses to prove their value and sustainability in a particular market.

But why do credit card processing companies care?

Simply put, credit card processing companies are responsible for the transactions that pass through your business. Because of this, processors often don’t want to deal with the hassle of less-than-ideal businesses. A large number of chargebacks or a higher risk of potential fraud just isn’t worth it to many account providers. With the high volume of businesses out there looking for services, sometimes it’s just easier to pass on the more risky ones. This doesn’t mean that if you fall into the high-risk category that you won’t be able to find a credit card processing provider to work with you, it just might be a little more difficult. You do have options however. We’ll cover these a little later on.

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How do I know if I’m high risk?

Like we mentioned above, it depends on a variety of factors. A few of the more common reasons you might be considered high risk is if you fall into any of these categories: new business, bad credit, gambling, adult entertainment, weapon sales, online stores such as Amazon or eBay, antiques, lingerie, e-cigarettes/vaping or anything that could be construed as illegal.

This is by no means a comprehensive list, so you’ll want to do a bit more investigating before you look for a payments processor. But, when all’s said and done, whether your business is seen as risky is subjective and left completely up to the discretion of the payment processing provider. That means that some might consider you risky whiles others will be more than fine with taking on your business. You just simply won’t know until you try. High-risk credit card processing is a difficult topic to pin down — until you’re turned down or handed a contract, you might not know where your business falls.

SEE ALSO: How to Choose a Credit Card Processing Company

If I’m high risk, what are my options?

If you’ve determined that you’re most likely a high-risk merchant, there’s good news — we know you were probably looking for it at this point. Despite your high-risk status, you’re still likely to find a credit card processor who will be willing to work with you. Your terms and contracts are just going to be less desirable than that of your low-risk counterparts.

It might surprise you to know, but there are providers that specialize in high-risk businesses. There are also providers with less rigid guidelines that are willing to take on the additional responsibility. But yes, you should be prepared to pay higher rates — between one to two percent more than traditional rates. You should also expect a higher setup fee. If you’re a new business, just starting out with limited financial resources, it’s important to take this added cost into consideration. You don’t want additional fees from credit card transactions to immediately put you in the red.

If you are a high-risk business, there are also a few additional terms you might find yourself presented with. Not always, but often a processing company will require a rolling reserve. A rolling reserve is when a portion of a business’ sales are held and then gradually released over time. Think of it as the processor’s insurance policy in case your business goes under or is unable to cover excessive chargebacks. A high-risk business should also expect to pay higher chargeback fees and should be on the lookout for possible termination fees.


In the end, high-risk credit card processing is a tricky game. It’s important that, from the beginning, a small business owner weighs the pros and cons of opening a small business that could be considered high risk. If you’re considered high risk because of your credit, then you need to determine whether now is the right time for you to venture into the world of small business ownership. If it is, great! We wish you the best. Just make sure that the additional fees you will be required to pay don’t doom your business from the start.

If your business is considered high risk because of the industry you are entering. Make sure that you have enough funding to cover the additional cost of running a high-risk business. You should also make sure that the industry that you are entering is near and dear enough to your heart that it will outweigh any additional hassle that will accompany running your business. In the end, regardless of the reason that you fall under the high-risk umbrella, make sure that you read your processing contract carefully, and if you have questions, ask. Knowledge is power and you can never have too much of either when it comes to running a small business.

About the Author

Sara Sugar is ShopKeep point of sale’s in-house Content Marketing Specialist. Sara uses her distinguished journalism background to boil down topics like POS system technology, payments, and payment security for small business owners.