What are high risk merchant accounts and which are the best?

A high risk merchant account pretty much does what it says on the tin. It’s a merchant account for businesses that are considered high risk by banks.

There are loads of possible reasons for this – your industry might have a high volume of chargebacks (card refunds claimed through banks), trade in high-value international transactions, or have a poor credit history.

But whatever the reason, you’ll need a special high risk merchant account, and you’ll have to pay higher fees and deal with greater scrutiny. There are some reliable service providers in the sector to consider:

Before you commit to any particular provider, it’s essential to understand the ongoing fees you’ll encounter. You can use our simple free merchant account comparison tool, below, to find the perfect high risk merchant account for your business. It takes less than a minute and there’s no obligation – just answer some questions about what you’re looking for, and receive bespoke merchant account quotes from trusted top suppliers:

This guide will cover what a high risk merchant account is, what makes an industry high risk, the best merchant account providers, and how to open a merchant account.

What are high risk merchant accounts?

High risk merchant accounts are issued by financial institutions to businesses that have an increased risk of having to issue high value chargebacks (a special type of card refund that customers claim through their bank), or that are considered more likely to be victims of fraud.

You may also need a high risk merchant account if you have high monthly sales volumes (over £15,000), frequently conduct high value transactions, or have a poor credit rating/lack of credit history.

Because of the higher risk involved (or perceived higher risk), high risk merchant accounts charge higher fees and you may have to keep a larger sum of money in the account in order to ensure that enough funds are available to cover the risk factors.

To learn more about merchant accounts in general, check out our what is a merchant account guide.

What makes a business high risk?

To some extent, risk is in the eye of the beholder – each payment processor has its own risk standards, and it’s possible some will consider your business high risk while others won’t.

However, here are some of the warning signs providers look for:

• Monthly sales above £15,000
• Average credit card transaction value above £400
• Need to accept multiple currencies
• Poor credit rating or a lack of credit history
• Digital or abstract product offering such as software, tickets or bookings
• History of large chargebacks
• Deals largely in international transactions involving countries with high chargeback risk (generally anywhere outside the UK, EU, US and Australia/New Zealand)

And, as we’ll discuss below, there are a wide variety of industries that are considered high risk because of the greater likelihood of chargebacks or fraud.

Which industries are considered high risk?

Some of the industries and businesses that will require a high risk merchant account include:

You’ll also need a high risk merchant account if you’ve got a poor credit rating – whether that’s a personal credit rating or a business credit rating.

What are the best high risk merchant accounts?

Our in-depth research identified PayPal, WorldPay, and ccNetPay as the three best high risk merchant account providers. 

Let’s see how they stack up:

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PayPal	WorldPay	ccNetPay
Summary All in one commerce platform with no contracts or set fees	Summary A super-secure platform that accepts payments in multiple currencies	Summary Transparent, uncomplicated fees and unlimited card transactions
Fees No set fee Interchange fee per transaction, depending on card 0.2%-2%	Fees Paid monthly £19 or £45 depending on features required	Fees Paid annually €950
Payment transfer time 3-5 business days	Payment transfer time Twice a week	Payment transfer time Up to 7 days

Quickly and easily compare high risk merchant accounts and get free, no-obligation quotes for your business Compare Costs

PayPal is a household name, so it should be a familiar brand for both you and your customers.

And its high risk merchant account services are pretty good overall, with no hidden fees.

Unfortunately, it might take you a while to understand PayPal’s complex 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 percentage varies depending on whether you take an online payment or a physical in-store payment.

Another key point is that PayPal offers an all-in-one payments service, including 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 three to five days.

A trusted merchant accounts brand, WorldPay has over 400,000 customers worldwide.

It’s renowned for its security and simple, transparent pricing. It doesn’t charge you extra for accepting payments in foreign currencies, and it doesn’t charge for processing refunds. 

WorldPay offers brick-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 pay for a bespoke package, even the £45 per month package has a limit of 850 transactions.

And you’ll also need a bespoke package for important features like 24/7 support and advanced fraud protection.

Check out our full Worldpay review for more information.

CcNetPay specialises in providing high risk merchant accounts for gaming, pharmaceutical, and adult entertainment businesses.

It’s a great choice for businesses selling in the EU as it has partnerships with several European acquiring banks.

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 that its high risk merchant accounts have a higher annual fee of €950, and a longer payout time of around seven days.

Unlike WorldPay, there are no limits on transaction volume.

However, fees are relatively high and you may need to wait a few weeks for account activation.

High risk merchant account fees

When comparing high risk merchant accounts, you’ll need to pay special attention to the fees involved.

Fees differ per provider, and are heavily dependent on your business’ circumstances. 

To help guide your search, here’s a partial list of high risk merchant account fees – and whether they apply to bricks and mortar and/or online payments:

What are the pros and cons of a high risk merchant account?

The drawbacks of a high risk merchant account are pretty clear – you’ll face higher fees, a more complex approval process, and longer processing times, and you’ll need to keep hefty cash reserves to cover potential losses from chargebacks or fraud.

So, what are the actual benefits of having a high risk merchant account?

Firstly, if you have a poor credit history, a high risk merchant account may be the only way you can be accepted for a merchant account and start rebuilding your credit.

More generally though, there are three key pros with high risk merchant accounts. You can:

• Sell worldwide – Having a high risk merchant account allows you to accept multiple currencies and sell to clients in countries that are considered high risk.
• Do business in high risk sectors – Some of the industries considered high risk are also hugely profitable, with gambling and ticket services notable examples.
• Enjoy increased chargeback protection – For some standard merchant accounts, a single chargeback can result in a terminated account, but you’ll have far greater leeway with a high risk merchant account.

How to open a high risk merchant account

A quick search of high risk merchant account providers will return a wide range of potential suppliers. But wherever you apply, you should expect a pretty lengthy process.

And you’re going to need a lot of paperwork, including:

• Company incorporation certificate
• Shareholders’ certificate
• A chart that shows your company’s organisational structure
• Copy of passports and utility bills for local directors and shareholders holding more than a 15% stake
• Processing history for at least the last six months (this should show the total value of transactions, the total volume of transactions, and the chargeback percentage)

Decisions are made on a case-by-case basis, with a variety of factors impacting what sort of offer you receive.

How to choose a high risk merchant account

Here are some key things to consider when comparing high risk merchant accounts:

Fees

Of course, price is always going to play a major factor in your choice of provider, but make sure you check the terms carefully to identify any hidden costs and work out how the pricing structure suits your business. Use hypothetical examples to work out how fees would play out in practice – what would you be charged for a £100 card transaction, for example, and how would those fees change if it was €100 or $100?

Monthly vs pay as you go

Most high risk merchant account providers offer both monthly fees and pay-as-you-go packages, and it’s crucial you select the model that best fits your business. Generally speaking, a pay-as-you-go plan is more suited to companies with low transaction volumes, while paying a monthly or annual fee works better for larger, more established companies – but you should check to see how each option stacks up for your business.

Payment transfer time

It’s easy to overlook this, but payment transfer time is hugely important for most businesses. Quite simply, this is how long it takes for money to move from the merchant account to your bank account – which could take anywhere from a few days to a week. This has major cash flow implications, and needs to be checked before you sign up.

How we test card processing products and merchant services for small businesses

We tested 11 merchant account products and services to evaluate them in terms of functionality, usability, price, compliance, and more so we can make the most useful recommendations to small UK-based businesses.

Our rigorous testing process means these products have been scored and rated in six main categories of investigation and 25 subcategories – in fact, we covered 36 areas of investigation in total. We then gave each category score a ‘relevance weighting' to ensure the product's final score perfectly reflects the needs of our Startups.co.uk readers.

Our main testing categories for merchant account products and services are:

Compliance: the adherence of the merchant account product to relevant regulations and standards, such as data security, anti-fraud measures, and legal requirements.

Customer Support: the assistance and resources provided by the merchant account provider to users in resolving issues, answering questions, and providing guidance.

Customer Score: external customer opinion; the feedback and ratings given by customers who have used a particular merchant account. Also, the market position and reputation a merchant account holds.

Features: the functionalities and capabilities provided by the merchant account product, including online payment processing and payment gateway integration.

Taking Payments: the process and options available for accepting payments through the merchant account product.

Price: the cost associated with using the merchant account product, such as transaction fees, setup fees, monthly fees, and any additional charges.

The Startups product testing process

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