What Is just a High-risk Merchant Account?

Businesses which are characterized as “high-risk” will be needing a high-risk merchant account to just accept debit and bank card payments. A high-risk business is one that's a larger likelihood of chargebacks or fraud (and certain other characteristics as well).

However, there's no central authority or framework in the payments industry that determines the chance factors associated with a business. Instead, every bank and every payment processor has its pair of standards.

Some payment solution providers may state upfront that they don't serve certain industries. Others will typically seek detailed information about a company to ascertain risk—depending which their application might be accepted or rejected. Ultimately, everything boils down seriously to a payment processor's internal criteria and outlook towards risk management.

What Factors Determine If your Merchant Is High-risk?
Businesses from certain industries that innately carry higher risks may be automatically flagged as high-risk businesses. Here are a few types of high-risk industries:

CBD (Cannabidiol), e-cigarettes, and vape
Stun guns and tasers
Credit repair
Multilevel Marketing (MLM)
Adult products/services
Pawnshops
Supplements and nutraceuticals
Tech support
Search Engine Optimization (SEO) services
Besides this, there are lots of other factors that can result in labeling a small business as “high-risk”:

Some processors could label you as “high-risk” if you should be a fresh entrant and have not processed payments before.
Poor credit records or low credit scores for defaulting on loans, etc., are other significant factors. If a processor has previously place you on the MATCH list, that can raise your risk perception as well.
The exact same goes for businesses that have controversial product lines or operate on a slippery legal slope.
Businesses which can be overly dependent on international sales may also have high-risk scores. This really is due to the relatively unpredictable economic dynamics abroad.
Industries that are highly regulated by legislation or governments are also labeled “high-risk.”
How Do High-risk Accounts Differ from Regular Accounts for Payment Processors?
Being labeled as a high-risk business can appear to be quite daunting. A model may simply decline your application. Alternatively, however, a payment processor might elect to offset your inherent business risk by enforcing some measures.

There are many ways where a payment processing company may mitigate its risk. They're also the prime differentiators between high-risk and regular merchant accounts.

Longer application process
If you're applying for a high risk merchant account providers in USA, a merchant services provider may ask for very detailed information to analyze your risk profile or study past patterns of your finances. Typically payment processing companies will check your business'processing history, partnerships, and even your individual credit history (to watch out for bad credit, etc.).

Higher payment processing fees
For standard small businesses, payment processing fees may be 0.3% above the rate of interchange. However, for a high-risk merchant account, this may go up to 1.5% as well as the interchange rate. While interchange fees can vary greatly from company to company, generally speaking, higher risk will incur higher fees.