What is a high risk merchant account?
Looking to start a business in what's considered to be a high risk industry? Have a bad credit history that you’re looking to remedy? A high risk merchant account could be for you!
Card payments and merchant accounts go hand in hand. If you want to take card payments, you need to have a merchant account; whether that’s a shared merchant account provided by the likes of Square, or a private one hosted by a financial body, such as a bank.
A merchant account acts as the middleman between your payment system and your business account – it’s a holding place where transactions can be validated, and from which chargebacks and refunds can be issued.
If the industry in which your business operates carries a high chance of high value chargebacks, refunds, or fraudulent purchases – or you deal with high value transactions in general – banks will deem your business high risk. That’s when you’ll be issued a high risk merchant account.
Additionally, if you (as the holder of the merchant account) or your business has a bad credit history, a bank will issue you a high risk merchant account – at least until you’ve had the chance to build your credit rating up.
In this article, we’ll answer the question ‘what is a high risk merchant account?’, answer any further questions you may have regarding the topic of high risk merchant accounts, and clue you into some of the top high risk merchant account providers.
If you’d like to dive straight into finding the best high risk merchant account provider for your business, you can do so quickly and easily, just by answering the questions in our questionnaire.
Our team of merchant account experts have designed this questionnaire to help businesses like yours get the answers they need – pain-free.
Once you’ve answered the questions, we’ll pair you up with the providers that best match your needs, and they’ll get in touch with quotes and more information for you to compare.
What is a high risk merchant account?
A high risk merchant account is a type of merchant account supplied by financial bodies to businesses that carry a higher risk of issuing high value chargebacks and refunds, or of falling victim to fraudulent purchases.
They’re also issued to businesses that experience high volumes of monthly sales surpassing around £15,000, to those that carry out high value transactions in general, and to those who have a low credit rating.
High risk merchant accounts are characterised by their higher fees. Financial bodies may also require you to keep a larger sum of money in the account, in order to ensure funds are available to cover the risk factors.
Watch the video below to find out more.
High risk merchant account vs regular merchant account
As we already mentioned in the ‘what is a high risk merchant account?' section, a high risk merchant account is characterised by both higher fees and a higher rolling reserve (the amount of money you should keep in your account).
But there are some other key differences between a high risk merchant account and a regular merchant account that you should be aware of.
If you’re unsure on which type of merchant account is right for your business, the table below will help you out.
|High risk merchant account||Standard merchant account|
|For high risk businesses||For low risk businesses|
|For businesses that take above £15,000/month||For businesses with lower monthly takings|
|Payments in multiple currencies accepted||Payments in one currency accepted|
|Suitable for businesses and owners with low credit scores||Good credit rating required|
|Suitable for digital and abstract product offerings (e.g. software, tickets, bookings)||For the sale of lower value physical items (e.g. clothing, food, supplies)|
If you’re still not entirely sure about whether your business qualifies for a high risk merchant account or a standard merchant account, or you’d like to find out which merchant account provider is best for your business, our comparison tool can help.
It was developed by our team of merchant account experts so business owners can find the right high risk merchant account provider for their needs, without the hassle of having to do hours of research themselves.
Over 1,500 businesses used our comparison tool to find a merchant account in 2020 alone. If it worked for them, we’re sure it’ll work for you. Head on over to the tool, answer a few simple questions, and it’ll pair you with the right providers based on your responses!
Who needs a high risk merchant account?
A high risk merchant account is required by businesses that take transactions which may involve a high risk of chargebacks, refunds, and fraudulent activity. Typically, these are businesses that deal with high value and/or abstract products, like bookings, bets, and software products.
Here’s a non-exhaustive list of industries and businesses that will require a high risk merchant account:
Interchange fee per transaction, depending on card
£19 or £45 depending on features required
|Payment transfer time|
Best for: a pay-as-you-go pricing structure
PayPal is a household name, so it’s already got the familiarity factor. The good news is, its high risk merchant account services are pretty good, and it doesn’t hide any of its fees. The bad news is, you’ll need several days to get your head around the PayPal pricing structure.
Instead of charging you a monthly fee for your merchant account, PayPal adds an extra percentage to the amount it takes off each transaction to cover any processing costs. This differs depending on whether you take an online payment or a physical in-store payment.
PayPal offers an all-in-one payments service, with virtual terminal and payment gateway services. This means that for each transaction, you’re instantly paid into your PayPal account. Transferring funds from your PayPal account to your business account takes about 3-5 days.
Best for: set monthly fees and regular payouts
Another high risk merchant account with the familiarity factor, WorldPay has over 400,000 customers worldwide. It’s renowned for its security and simple, transparent pricing. It doesn’t charge you any more for accepting payments in foreign currencies, and it doesn’t charge for processing refunds.
WorldPay offers bricks and mortar businesses pay-as-you-go, monthly, and standard merchant packages. Each package comes with different fees, with the pay-as-you-go package requiring you to pay a £150 upfront cost for a payment terminal (card machine).
While a rolling monthly contract is recommended for well-established businesses, unless you go for a bespoke package, even the £45 per month package has a limit of 850 transactions. And if you want things like 24/7 support and advanced fraud protection, you’ll also need to have a look at getting a bespoke merchant package.
Check out our full WorldPay review.
Best for: A simple pricing structure and EU transactions
ccNetPay specialises in providing high risk merchant accounts for businesses that operate within the gaming, pharmaceutical, and adult entertainment spaces. With partnerships with several European acquiring banks, it’s a good choice for businesses selling in the EU.
Its fees are transparent and readily available on its website. ccNetPay makes it clear that the only differences between its low risk and high risk merchant services are a higher annual fee of €950, and a longer payout time of around seven days.
Unlike WorldPay, there is no limit to the number of transactions you can take. However, you will need to make sacrifices with things like account activation times, and its fees are slightly on the high side.
High risk merchant account fees
When comparing merchant account providers, you’ll need to pay special attention to the fees involved. Fees differ per provider, and are heavily dependent on your business’s circumstances.
Here’s a non-exhaustive list of high risk merchant account fees, and whether they apply to bricks and mortar and/or online payments:
|Merchant account fees – paid per transaction, monthly, or annually||Typically £100 - £700 per year||✓||✓|
|Transaction fees – paid per transaction||1.25% - 2.75% of each transaction||✓||✓|
|Payment gateway fees||Around £20/month||✗||✓|
|Currency transfer fees||Around 0.5% - 2% for Europe||✓||✓|
|Payment terminal rental||Annual rental around £170||✓||✗|
|PCI compliance fee||Around £20/month||✓||✓|
|Chargeback fees||£5 to £15||✓||✓|
How to get a high risk merchant account
A quick google of high risk merchant account providers will bring up a whole range of potential suppliers, but as we’ve established in this article, there’s a lot to consider when choosing the right one.
The most important thing to do is to compare merchant fees. The previous section on merchant account fees shows you just how many different types there are – they’ll differ for each provider, and change depending on your business’s circumstances.
We know that it’s a pain to find straightforward, transparent pricing, and without it, you won’t be able to find the best high risk merchant account provider for your business. That’s why we’ve developed our comparison tool.
It really is a simple way to cut through the noise, and receive high risk merchant account quotes that are tailored to your business.
Just head on through to our short quiz, answer a few simple questions, and you’ll have all the information you need to make an informed decision in no time!
What is a high risk merchant account: a summary
Here’s the most important information you need to take away:
- A high risk merchant account is for businesses that take transactions which carry a high risk of high value chargebacks, refunds, or fraudulent purchases
- They’re also for businesses that carry out high value transactions in general, for those with a poor credit rating, and for those that accept payments in multiple currencies
- They usually incur a higher monthly or annual fee than a standard merchant account
- They all incur different fees and charges, which are based on whether you want to pay-as-you-go, pay monthly, or pay annually. Charges also depend on your business circumstances