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What is High Risk Credit Card Processing?

Updated on July 12, 2014
What is a High Risk Merchant Account?  Find out!
What is a High Risk Merchant Account? Find out!

Did you just start your business only to find out that you are what is called a High Risk merchant when it comes to your merchant account to accept credit cards? Maybe you had a merchant account and everything was going just fine until you got a call saying that your account was suddenly shut down. It happens everyday that an ambitious entrepreneur is ready to open the doors to their new pride and joy when the simplest of tasks, setting up a merchant account to accept credit cards, paralyzes their ability to do business. What follows is frustrating, confusing, and chaotic as salesperson after salesperson makes promises and has the entrepreneur fill out lengthy and time consuming forms - only to find out their merchant account request got turned down again. This is an all too frequent occurrence in the world of high risk merchant services as there are a lot of inexperienced sales representatives making claims that they cannot live up to! So have you been surprised to find out that your business is considered “High Risk” in the eyes of the banking world? Do you need to get a High Risk merchant account for your "High Risk" business and are looking for more information so that you are well educated of the potential pitfalls? Well first lets take a look at what a high risk merchant account is and why.

  1. Jewelry

  2. Law Firms

  3. Meat Provisions, Freezer, Lockers

  4. Membership Sites

  5. MLM

  6. Mortgage Services / Securities Sales

  7. Multi-level Marketing

  8. Nutraceuticals/Herbal Supplements

  9. Online Casinos

  10. Online Gaming

  11. Online Retail

  12. Outbound / Inbound Telemarketing / Phone Solicitation

  13. Payday Loans

  14. Pawn Shops

  15. Penny Auctions

  16. Personal Injury

  17. Phone Cards/Calling Cards

  18. PPI Claims

  19. Phone Escorts

  20. Replica

  21. Satellite TV

  22. Scholarship Programs

  23. Seminars, Educational

  24. Social Gaming

  25. Sports Cards

  26. Sports Forecasting / Consulting

  27. Stock Trading

  28. Tech Support

  29. Telemarketing

  30. Telecommunications Equipment Sales

  31. Tickets/Concert/Sporting Events

  32. Time Share Sales

  33. Travel/Travel Agencies

  34. Used Auto Sales

  35. VOIP and Telecom Services

  36. Watches

  37. Water Purifiers

  38. Internet Gambling/Gaming

  39. Investment Opportunities

  40. Internet / Custom Jewelry Sales

  41. Internet Pharmaceuticals / Vitamins

  42. Airline Tickets

  43. Adult Sites and Products

  44. Amusement & Recreation Services

  45. Auto Rental

  46. Bail Bondsmen

  47. Buying / Shopping Clubs / Wholesale Clubs

  48. Cash Advance

  49. Collection Agencies

  50. Continuity

  51. Lotteries

  52. Cellular Phones & Beepers

  53. Check Cashing Services

  54. Cigars

  55. Coin Shops

  56. Collection Agencies

  57. Computer Stores

  58. Credit Repair

  59. Credit Interest Rate Reduction

  60. Custom Products

  61. Dating Websites

  62. Debt Consolidation

  63. Detective Services

  64. Door-to-Door Sales

  65. Downloading of Software

  66. Ebooks and Software

  67. E-Cigarettes

  68. Educational Software

  69. Electronics

  70. Escort Services / Massage Parlors

  71. Extended Warranties

  72. Financial Services

  73. FFL Dealers/Firearms

  74. Forex Trading

  75. Gentlemen's Clubs

  76. Gun Shops

  77. Hair Restoration Services

  78. High Volume / High Ticket

  79. Home / Apartment Operated Business

  80. Horoscope / Fortune Tellers

  81. Infomercials

  82. Insurance Products

What is a High Risk Merchant Account?

In the realm of accepting credit cards there is a lot and I mean A LOT of bad information out there that leads to confusion. I mean why should anyone have to pay to accept credit cards anyway when the more consumers charge on their cards - the more money the bank makes right? Well not always, for analogy purposes lets look at credit card processing like the insurance world (I know - they make way too much money too!). Insurance rates are based on actual or perceived risk as assessed through algorithms and historical studies. This law of averages allows the insurance companies to assign a “rate” to whatever they are insuring based on their “risk” of having to reimburse the cost of that item. Well it works in much the same way with merchant services (or credit card processing) so that your business can accept credit cards. Those industries that have a history of a high chargeback rate, legal and/or moral ambiguity, or vague products can carry higher rates because the bank that processes and funds the transaction is the one who can get held holding the bill in the event of chargebacks, illegal activity, or fraud. This also applies to the card issuing bank as they are in charge of assigning an Interchange Rate to their card based on what they project their cost and profit needs are (you can read about interchange in my article here). Being that High Risk Merchant Accounts are more risky to the processing bank most traditional processing platforms will not work with high risk merchants and they will maintain a list of “prohibited merchant types”. Most high risk merchants have to use specialized credit card processing banks or offshore accounts. How do you know if your business is considered High Risk? The list to the right is a broad list of what most banks consider to be “high risk merchant accounts”. Now please note that just because your business is one of these account types does not mean that you will have a problem getting an account but that it may be as simple as needing to supply more documentation to be approved for a merchant account to accept credit cards.

So what can you do to be able to accept credit cards in your “high risk” business?

Well first off, as I mentioned, many of the industries listed above will simply have to provide more detailed information than is contained in a standard application. Some industries such as adult, marijuana seed banks, MLM, travel, gaming, replica clothes/watches, dating sites, pharma, e cigarettes, and/or TMF (previously shut down accounts) will need a specialized provider that truly understands the industry, has the appropriate banking relationships, and the experience to guide you through the process seamlessly without the hassle of filling out application after application. One thing you do NOT want to do is simultaneously fill out a bunch of applications as this can trigger red flags in the banking system.

Will Domestic Banks work with your High Risk Merchant Account?

Often times the industries listed above can be booked domestically and most domestic processing banks have a “sub bank” with separate underwriting and approval methods because the main bank brand does not want any unwanted publicity for the bank or provider because of the type of business. There can be potential legal and financial liability for participating in the sale of banned services or products. and there is always the perceived risk of excessive chargebacks and returns. However, often times a domestic banking solution will happily work with your business if you have a complete application package which may include some or all of the following:

  1. Completed Merchant Account Application

  2. Domain Registration (Screenshot)

  3. Detailed Description of business activities

  4. Valid Photo ID or Passport

  5. Business License(s)

  6. Business and Marketing Plan

  7. Credit Card Processing History (3 to 6 months)

  8. Personal Bank Reference Letter and Statements (3 to 6 months)

  9. Personal Utility Bill

  10. Company Bank Reference Letter and Statements

  11. Certificate of Incorporation or Registration

  12. Supplier’s Agreement

Working with offshore banks for your high risk merchant account is safer and easier than ever.
Working with offshore banks for your high risk merchant account is safer and easier than ever.

Working with Offshore Payment Providers

Dealing with offshore banks for your high risk merchant account is often not only THE only solution but in many cases may be your best solution. In recent years we have seen a steady move away from domestic account providers and increased participation with offshore payment processors who offer merchant accounts. Although traditionally, domestic institutions have been perceived as the most secure option available there has been an influx of e-commerce and advancements in offshore payment processing. In many industries offshore merchant accounts have become the preferred alternative.

Are there benefits to working with offshore banks for your high risk merchant account?
Are there benefits to working with offshore banks for your high risk merchant account?

Are there Benefits to working with Reputable Offshore Banks?

Working with offshore payment processors can have many benefits to your business. For instance, in most cases they will not enforce processing volume limits, unlike domestic account providers. Domestic providers respond to increased revenue by flagging it as fraud and immediately suspending, penalizing or closing the merchant account. Offshore payment processors foster a culture that encourages increases in revenues by utilizing more sophisticated security measures that prohibit them being deemed fraudulent. In addition, they reward increases in processing volume with lower rates and more thorough and comprehensive support.

Offshore and third party providers, unlike most domestic providers, also realize the advantages of being able communicate with customers in their own language and transact with them in their own currency. Offshore and third party providers offer these services to allow access to lucrative international markets and can dramatically expand your customer base. The majority of domestic processors routinely place blanket bans on international customers instead of supplying adequate security screening that would allow for widespread access and business growth.

Domestic providers are bound by legislation and too often exhibit a tendency for exaggerated and unnecessary vigilance. Offshore providers are not constrained by domestic law and policy or hyperbolic caution; they are free to accept any business they choose. It is ever more challenging and arduous for high risk/high volume e-commerce businesses to be accepted by a domestic provider, frequently being subject to exorbitant security bonds due to perceived risk.

A Few More Reasons an Offshore Banking Partner May be Right for your Business

  1. -Increase sales and revenue by virtue of international access

  2. -Multi-currency options

  3. -Multilingual capabilities

  4. -99% acceptance rate regardless of industry risk

  5. -No monthly volume limits

  6. -Increased market penetration

  7. -No country discrimination

  8. -Full offshore security screening

  9. -Back end administration and full spread reporting

Where do you start for a high risk merchant account?  Take the mystery out of merchant services with the Merchant Doctor!
Where do you start for a high risk merchant account? Take the mystery out of merchant services with the Merchant Doctor!

Where do you Start?

If you need assistance with your High Risk merchant account to accept credit cards the Merchant Doctor team not only has the expertise but has allied with absolute best international and domestic credit card processing banks to provide you with the best experience possible, lowest rates, and most advanced solutions for your business. To get more information simply contact them for an honest, transparent, and friendly consultation.


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