High-risk credit card processing sounds like an extreme that most online business owners want to avoid. But the truth is that you likely are a high-risk business.

Banks and processors often see high-risk businesses as more likely to face chargebacks or fraud, so they set stricter rules or higher fees. But don’t worry, there are smart ways to accept payments and keep your business running smoothly.

Whether you’re just starting out, looking for a backup solution, or need or a more stable replacement, you have options. A dedicated merchant account is usually your best bet for long-term success, but payment service providers (PSPs) like Stripe or PayPal can help you get started or bridge the gap.

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What Makes a Business High-Risk?

Not all businesses are created equal in the eyes of banks and payment processors. Some industries and business models carry more risk than others, and that’s where the “high-risk” label comes in.

But what actually makes a business high-risk?

Common Reasons Businesses Are Considered High-Risk

Banks and processors use a few key factors to decide if a business is high-risk:

• High Chargeback Rates: If customers are likely to dispute charges or request refunds, your business could be flagged as high-risk.
• Large Transaction Amounts: Selling expensive products or services increases the risk for payment processors.
• Recurring Payments: Subscription models or memberships can lead to more chargebacks and cancellations.
• International Sales: Doing business across borders adds complexity and potential for fraud.
• Regulatory Issues: Some industries face strict laws or changing regulations, making them riskier for processors.

Examples of High-Risk Industries

Certain industries almost always fall into the high-risk category. Here are a few examples:

• Online gaming and gambling
• Adult entertainment
• Travel and ticketing agencies
• CBD, vape, and supplement sales
• Debt collection and financial services
• E-commerce stores selling high-ticket items

If your business fits into one of these categories, or shares similar risk factors, you’ll likely need to look for payment solutions designed for high-risk merchants.

With the right approach, you can still accept payments smoothly and securely.

FAST, SECURE HIGH-RISK PAYMENT PROCESSING

Why a Dedicated Merchant Account Is the Best Choice

If you run a high-risk business, a dedicated merchant account gives you the best chance for long-term payment success. Unlike all-in-one payment service providers, a dedicated merchant account is set up just for your business and tailored to your unique needs.

Advantages of a Dedicated Merchant Account

• Stability and Control: With your own merchant account, you have more control over your funds. You’re less likely to face sudden account freezes or holds, which can happen with general payment platforms.
• Higher Processing Limits: Dedicated merchant accounts are built to handle larger transaction volumes and higher-value sales, so your business can grow without hitting roadblocks.
• Custom Risk Management: High-risk merchant account providers understand your industry. They offer tools and support to help manage chargebacks, fraud, and compliance issues.
• Better Support: You get access to specialized customer service teams who know the ins and outs of high-risk processing.

Key Features to Look For

When choosing a high-risk merchant account provider, keep these features in mind:

• Transparent Pricing: Look for clear, upfront fees with no hidden charges.
• Chargeback Protection: Make sure the provider offers tools to help you prevent and fight chargebacks.
• Fast Payouts: Reliable access to your funds keeps your business running smoothly.
• Integration Options: Choose a provider that works with your website, shopping cart, or point-of-sale system.

A dedicated merchant account may require a bit more paperwork and underwriting, but the extra effort pays off. You’ll gain a payment solution that’s designed for your business, helping you build trust with customers and grow with confidence.

SCALE YOUR BUSINESS SECURELY

Using Payment Service Providers (PSPs) Like Stripe or PayPal

Payment service providers (PSPs) like Stripe and PayPal make it easy for new businesses to start accepting payments online. They’re popular because they’re quick to set up, require little upfront paperwork, and are trusted by customers worldwide.

However, if your business is considered high-risk, using these platforms comes with important limitations and risks you need to understand.

How PSPs Work for High-Risk Businesses

Stripe and PayPal generally don’t specialize in high-risk industries. Their business models focus on fast onboarding with minimal initial checks, but they conduct ongoing monitoring of your transactions.

If your business triggers any red flags such as high chargeback rates, sudden spikes in processing volume, or sales of restricted products, your account can be limited, frozen, or even shut down without warning.

Pros of Using Stripe or PayPal

• Fast and easy account setup
• No need for lengthy underwriting
• Trusted by millions of buyers
• Useful for building an initial transaction history

Cons and Risks for High-Risk Merchants

• Higher transaction fees, especially for online sales and chargebacks
• Risk of sudden account freezes or funding holds, which can disrupt your cash flow
• Strict rules on what types of products and services you can sell-many high-risk industries are outright prohibited or heavily restricted
• Limited support and fewer tools for managing high-risk issues like chargebacks

When to Use a PSP as a High-Risk Business

If you’re just starting out or need a backup payment solution, Stripe or PayPal can help you process up to $20,000 per month and build a track record of successful transactions.

This history can make it easier to qualify for a dedicated high-risk merchant account later. However, you should use PSPs with caution and always have a plan to transition to a more robust solution as your business grows.

Tips for Minimizing Risk

• Stay within the platform’s guidelines and avoid selling restricted products
• Keep your chargeback ratio low and respond quickly to customer disputes
• Be transparent about your business model and provide clear, accurate information to the PSP
• Monitor your account for any unusual activity that could trigger a review or freeze

While Stripe and PayPal offer convenience, they aren’t designed for the long-term needs of high-risk merchants. Use them as a stepping stone or backup, but aim to secure a dedicated merchant account for greater stability and control as soon as you can.

PAYMENT PROCESSING THAT SCALES WITH YOU

7 Best Practices for High-Risk Payment Processing

Operating in a high-risk industry means you face extra scrutiny, higher fees, and more complex challenges than standard merchants.

However, you can protect your business and keep payments flowing smoothly by following these proven best practices:

1. Implement Robust Fraud Prevention Measures

• Use advanced fraud detection tools that leverage machine learning and real-time analytics to flag suspicious transactions before they cause harm.
• Add layers of security, such as Address Verification Systems (AVS), Card Verification Value (CVV) checks, and multi-factor authentication, to help prevent unauthorized transactions.
• Choose a secure payment gateway that complies with PCI DSS standards to safeguard sensitive customer data.

2. Optimize Chargeback Management

• Provide clear product descriptions, terms of service, and refund policies to set proper expectations and reduce disputes.
• Respond quickly to customer inquiries and resolve complaints before they escalate into chargebacks.
• Use chargeback alerts and tracking tools to catch and address disputes early. Keep meticulous records of all transactions and communications to support your case if you need to dispute a chargeback.

3. Maintain Compliance with Industry Standards

• Ensure your business meets PCI DSS requirements to protect cardholder data and reduce liability.
• Follow Anti-Money Laundering (AML) and Know Your Customer (KYC) policies to verify customer identities and prevent illegal activities.
• Conduct regular audits to ensure ongoing compliance with all relevant laws and regulations.

4. Build Strong Customer Relationships

• Clearly communicate your payment, refund, and return policies on your website and at checkout.
• Offer responsive customer support to address issues promptly and professionally, which helps prevent misunderstandings and disputes.
• Send order confirmations and tracking information to keep customers informed and reduce confusion.

5. Monitor and Analyze Account Performance

• Track key metrics such as transaction volume, chargeback rates, and fraud incidents. Use analytics tools to spot trends and identify areas for improvement.
• Regularly review your payment processing systems and merchant account performance to ensure everything is running smoothly and efficiently.

6. Choose the Right Payment Partners

• Work with payment processors and merchant account providers who specialize in high-risk industries and offer tailored solutions, transparent pricing, and strong customer support.
• Review contract terms carefully, paying attention to fees, reserves, and termination clauses.

7. Manage Financial Reserves and Cash Flow

• Be prepared for rolling reserves or holdbacks, where a portion of your revenue is withheld as a safeguard against chargebacks or fraud.
• Maintain a financial buffer to cover unexpected liabilities and ensure your business can operate smoothly even if some funds are temporarily inaccessible.

By following these best practices, you can minimize risk, maintain your merchant account, and set your high-risk business up for long-term success.

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