Disadvantages of a high-risk merchant account

Disadvantages of having a high-risk merchant account.

The Typical Disadvantages of a High-Risk Merchant Account

High-risk merchant accounts bring unique challenges and additional charges that businesses must be aware of. These barriers can make it more difficult for high-risk businesses to get and maintain a payment processing merchant account, resulting in higher business expenses.

High-Risk Merchants are frequently thought of as those with interests in industries that involve the sale of goods or services, such as gaming, gambling, adult services, pharmaceuticals, tobacco, and vaping or e-cigarettes. A significant amount of fraud affects the majority of these industries.

Vendreo however creates a payment directly from the buyer’s bank account into the Merchants account using Open Banking. Open Banking is not concerned with risk making it industry-neutral. The risk of chargebacks or fraud from credit card purchases is eliminated by this as well as a significantly greater level of security.

Additionally, businesses may be deemed high-risk if they trade with specific nations or in specific currencies, have a history of chargeback claims or other complaints related to transactions, have a poor credit history or credit score, or any of these circumstances apply.

What is a high-risk merchant?

Who are High-Risk Merchants?

Greater Fees

The prospect of additional costs for merchant services is one of the major challenges connected with high-risk merchant accounts. For high-risk organisations, payment processing rates and costs, such as higher chargeback fees, transaction fees, and monthly fees, may increase. The company’s bottom line could be impacted by this by increasing the cost of accepting credit cards.

Holds and Reserves

Account holds, and rolling reserves are another difficulty that high-risk businesses may face. Financial institutions may require high-risk merchants to place a hold or reserve on their accounts, which can limit the merchant’s access to funds from credit card transactions. This might make managing the company’s cash flow more complex and negatively impact its operations.

Difficulty Finding a Provider

High-risk companies may also have trouble finding a merchant services provider or payment processor willing to work with them. Financial institutions and payment processors may be hesitant to work with high-risk merchants due to the increased risk of fraud and chargebacks. This may make it more difficult for the firm to find a supplier willing to work with them, restricting their options and raising their pricing. The decline rates for merchants in high-risk sectors from merchant account providers is very high.

Higher Regulation

Another major roadblock for high-risk enterprises is increased compliance and regulatory restrictions. Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, which both boost decline rates, may apply to high-risk merchants. These demands could raise the company’s costs and administrative burdens, making it harder to maintain its merchant account.

Complaints and chargebacks

Furthermore, chargebacks and customer complaints regarding sales transactions may be more common in high-risk businesses. Usually, higher chargeback fees will be charged. As a result, merchants might be forced to establish more stringent chargeback management and prevention procedures, adding to their expenses and administrative burdens.

Rolling Reserves

Rolling reserves are a type of reserve that is held by a payment processor or merchant bank to protect against potential chargebacks or other losses associated with a merchant account. Rolling reserves are typically used for high-risk merchant accounts, which are merchant accounts that are considered to be more likely to experience chargebacks or other losses due to the type of business they conduct.


Finding a merchant account provider who will cooperate with them in the long run may be difficult for high-risk firms. High-risk businesses are more likely to have their merchant accounts cancelled or suspended by their suppliers, making it more challenging for the business to find a new source willing to cooperate with them. When a supplier is terminated by one, other providers are frequently less inclined to want to hire them.

The Facts

  • A high-risk merchant account is a type of merchant account that is associated with a higher risk of chargebacks, fraud, and other financial losses.
  • They are typically associated with businesses that have a higher risk of fraud and chargebacks, such as online gambling, adult entertainment, and travel services.
  • These merchant accounts for payment processing often have higher fees and higher processing limits than regular merchant accounts.
  • High-risk merchant accounts are more likely to be declined by banks and payment processors due to the higher risk associated with them.
  • Accounts may require additional documentation and verification before they are approved.
  • High-risk merchant accounts may be subject to more frequent reviews and audits by the payment processor.
  • High-risk merchant accounts may be subject to additional fees, such as chargeback fees, fraud prevention fees, and other fees.

To Wrap It Up

In conclusion, businesses must be aware of the special challenges and costs associated with high-risk merchant accounts. Higher fees, account holds, rolling reserves, a challenge in finding a merchant services provider, more stringent compliance and regulatory requirements, a higher risk of chargebacks and disputes, and a challenge in finding a merchant account provider willing to work with them over the long term may all be experienced by high-risk merchants. These obstacles may make it harder for high-risk enterprises to open and maintain a merchant account, which would raise operating costs. To maintain a reliable payment processing system for their business, business owners need to be aware of these difficulties and equipped to deal with them.


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