Differences between High-Risk and Low-Risk Merchant Accounts

Businesses need to start accepting payments as soon as they open. A merchant account allows for the smooth running of a business. These types of accounts enable payment processing through credit or debit cards.

The merchant accounts improve business operations in a world that's increasingly becoming cashless. Additionally, business owners become exposed to different online payments method such as digital wallets.

Depending on the type of business, business owners can require high-risk merchant accounts or low-risk. Various factors affect a business being labeled as high-risk or low-risk. These two accounts have varying characteristics. Below are the differences between high-risk and low-risk merchant accounts.

Chargeback Ratio

A chargeback happens when a customer demands a full refund on their payment and returns their purchase. These chargebacks are expensive for payment processors, and the business needs to pay the chargeback fees.

One of the differences between low-risk merchant accounts and high risk is the chargeback ratio. Low-risk merchant accounts operate with little to no chargeback. These accounts also have a solid financial history and high card-present transactions. As a result, there are fewer chargeback requests as the cards were available during transactions.

However, high-risk merchants have a high chargeback ratio, meaning they need to use high-risk merchant account providers for processing payments.

Financial Stability

Another difference between high-risk merchant accounts and low-risk is business stability. Low-risk merchants maintain a sustainable revenue stream all year round. High-risk merchants struggle with maintaining stability.

Most new businesses almost always get a high-risk label due to the age of their operations. Established companies have built a reputation over the years, classifying them as low-risk.

Additionally, some businesses face low seasons and high seasons. As a result, these businesses get the label high-risk. Such businesses have inconsistent revenue compared to businesses that operate in all seasons.

Differences in Low-Risk and High-Risk Industry

Some businesses are automatically considered high-risk merchants based on their industry. Banks also refuse to handle payment processing for such sectors. Many banks find industries such as gambling, CBD, or adult entertainment problematic.

Businesses with reputational challenges such as operating around alcohol, other substances, sex, or prescription drugs are termed high-risk. These businesses are legitimate.

However, it is frustrating for merchants trying to deal with the bank to allow online payments. In this case, a merchant can apply for high-risk merchant accounts to enable payment processing.

On the other hand, low-rick merchant accounts support businesses deemed to be safe. These merchants operate retail shops, book stores, the food industry, auto parts, and others. In most cases, a card is present when processing a payment. As a result, they have a low chance of costing bank money. They also rarely attract rampant fraud.

Payment Processing Differences

Though many businesses have gone cashless, most high-risk businesses support online payments. As a result, these businesses have high levels of fraud, making them high risk. They are also prone to lawsuits and complaints, exposing the merchant provider to debt if the merchant disappears.

In low-risk businesses, most users are present to run their cards; as a result, it increases their credibility. Additionally, most low-risk merchant accounts support one currency. They also operate in their native country.

However, high-risk merchant accounts support multi-currencies. These merchants also sell internationally and mostly in countries with a lot of fraud. Moreover, these accounts support repeat or recurring subscription payments, leading to chargeback requests.

Differences in Transaction Volumes

If a business has high transaction volumes, it is considered high-risk. In this case, a merchant can apply for a high-risk merchant account to allow credit and debit card processing. Merchants with over $20000 payments per month are at high-risk. Additionally, they fit this category if they have an average transaction of $500.

Low-risk merchants trade in modest volumes that average $50 per transaction.

Different Pricing

Payment processing providers offer low-risk merchant accounts at a low cost than high-risk accounts. The high chargeback ratio, fraud risk, and high-complaints volumes in high-risk merchant accounts affect this pricing.

Additionally, high-risk merchants have poor credit scores from a bad credit history. Low-risk merchants have good credit scores making them more reliable.


Though low-risk merchant accounts have better pricing, they are also limiting for businesses that want to expand internationally. High-risk merchant accounts support online payments worldwide, which could increase revenue and growth. However, a low-risk merchant account offers better rates when operating a local business.

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