How To Determine If Your Business Should Opt For High-Risk Merchant Service?

High-risk merchant accounts are a type of payment processing account meant to be used by businesses with a high rate of chargebacks and refunds. These types of accounts exist because they tend to bring in more money than regular merchant accounts, but at the same time, they also have higher fees attached to them than standard ones do. This means that if you fall under high risk merchant service, then there are things you should know about what makes an account high-risk and how it works for your particular business model before signing up for one.

6 Factors To Determine If Your Business Should Opt For High-Risk Merchant Service

Company Type

The first thing you should do is determine the type of business you have. High-risk merchant services may be an excellent option if you accept payments online, over the phone, or in person. High-risk merchant service providers typically offer lower rates than traditional merchant services and are better suited for businesses that process more than $1 million in annual sales.

If your business has a high chargeback or refund rate, it may be beneficial to use high-risk merchant services since these companies often require customers to pay for purchases upfront and provide a more extended period for consumers to file claims against merchants.

Processing Volume

Processing volume is one of the most important factors to consider when determining whether or not your business falls under high-risk merchant service. Your processing volume is measured in dollars processed per month and can be found on your monthly statement. If you process more than $25,000 USD per month, then you are considered high risk by most merchant processors.

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If you process less than $25,000 USD per month, you may have an easier time finding a processor that will work with high-risk businesses. However, it’s important to note that some processors still consider these small businesses high-risk because they don’t want the hassle of dealing with fraud and chargebacks.


Chargebacks are a form of credit card dispute. When a customer disputes a transaction with their bank, the merchant is notified and must take action. The customer’s bank will send the disputed amount back to them, and it can take up to 30 days for your business to get paid back by the issuing bank. The chargeback ratio refers to how many chargebacks occur out of every 1,000 transactions you process through your account. This metric is important because if it falls below 1%, then your business may be considered high risk by banks or payment processors—meaning that they can’t provide services for you. After all, they don’t have adequate fraud protection in place if something goes wrong (which is why chargebacks are so dangerous).


If your business has a high refund rate, it is likely to be considered high risk by your bank. A high refund rate can indicate fraudulent activity and lead banks to terminate their relationship with you.

Refunds generally occur for the following reasons:

  • The customer did not authorize the purchase on their card
  • The product was damaged or defective when it arrived
  • The product does not match what was advertised online (e.g., color, size)

Fraudulent Activity

Fraudulent activity is one of the most common reasons for merchants to be flagged as high risk. This is when a customer uses their credit card for fraudulent activity, such as purchasing something from your business and then attempting to return it for a refund.

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The best way to determine if you are being affected by fraudulent activity is by tracking how many chargebacks, refunds, and fraud transactions you see monthly. If these numbers start increasing dramatically over time, then that’s probably why your account has been flagged as high risk.


If you have a history of chargebacks and refunds, there is a higher chance that you may be considered high risk. Chargebacks and refunds are both ways to reverse a transaction. Chargebacks are initiated by the customer, while refunds can be initiated by either the customer or you—the merchant. Both result in your business losing money, which is why they’re considered high-risk activities by most payment processors.

If fraud has occurred on your account, you’ll likely be flagged as high risk because this indicates poor security practices on your end (or, even worse: intentional fraud). The best way to avoid being flagged as high risk is to ensure that all transactions go smoothly and securely—and this can start with choosing the suitable payment processor!


Ultimately, you must decide based on your business needs and risk appetite. If you’re confident in managing risk, you may want to consider high-risk merchant services. The key is that if your business does choose this route, it has to be done effectively and responsibly.