High-Risk vs. Low-Risk Merchant Accounts: What You Need to Know
In an age where eCommerce businesses are becoming easier to start and turn a profit, payment processing is a critical piece of the puzzle to drive revenue. As such, understanding high-risk vs. low-risk merchant accounts is essential. Various factors determine your risk level for acquiring banks and processors.
This article explains the differences between high, medium, and low-risk merchant accounts, helping you understand how your business is evaluated by payment processors.
High-Risk vs. Medium-Risk vs. Low-Risk Merchant Accounts
When applying for a merchant account, your payment processor will extensively review your company to determine your risk level. Risk level impacts processing fees, with high-risk accounts generally paying more to offset additional risks for banks and processors.
Key Factors Determining Risk Level
- Chargeback ratio – Frequent chargebacks increase risk.
- Financial stability – Both business and personal credit are assessed.
- Industry type – Some industries (e.g., adult, CBD, dating) are inherently high-risk.
- Average ticket size – Transactions above $50 may increase risk.
- Fraud prevalence – Industries with high fraud rates are higher risk.
- Payment method – Card-present transactions are lower risk than card-not-present (CNP).
Below is a breakdown of the three risk categories.
Low-Risk Merchant Accounts
Low-risk merchants typically have strong financial histories, low chargeback ratios, and process transactions in industries considered safe. Common low-risk businesses include retail shops, pet supplies, online apparel stores, and parking garages.
Characteristics of Low-Risk Merchant Accounts
- Average ticket sales below $50
- Chargeback ratio is low
- Monthly processing volume is under $20,000
- Primarily card-present transactions
- Operate in low-risk industries
- Good personal and business credit
- Low fraud incidence
- Business operates in low-risk countries (e.g., U.S., Australia, Europe, Japan)
While low-risk merchants benefit from lower fees, sudden spikes in sales or unreported changes can lead to account freezes. Additionally, low-risk processors may offer fewer anti-fraud and chargeback prevention tools.
Medium-Risk Merchant Accounts
Medium-risk accounts fall between low and high-risk categories. These accounts may face slightly higher fees and scrutiny than low-risk merchants.
Examples of Medium-Risk Industries
- Health and beauty (one-off purchases)
- Telecommunication services
- Attorneys
- Utility payments
- Political party organizations
Risk factors such as financial history, billing models, and product types can elevate these industries to high-risk categories.
High-Risk Merchant Accounts
High-risk accounts are associated with industries or practices that pose increased risks to banks and processors, including higher fraud and chargeback rates.
Characteristics of High-Risk Merchant Accounts
- Operate in risky industries (e.g., CBD, adult, firearms, travel)
- Poor financial history
- Monthly processing volume exceeds $20,000
- High average ticket size (over $50)
- Majority of transactions are card-not-present
- High chargeback rates
- New businesses or startups
Examples of High-Risk Industries
- CBD
- Firearms
- Travel
- Adult entertainment
- Cryptocurrency
- Forex
- Vape
- Online dating
Can You Transition From High-Risk to Low-Risk?
While some risk factors (e.g., industry) cannot be changed, you can reduce your risk profile by:
- Improving credit history
- Reducing chargebacks with clear refund policies and anti-fraud tools
- Enhancing website security
- Using chargeback prevention solutions like CB-ALERT
Low-Risk Processing Options
Platforms like Shopify work well for low-risk merchants. However, high-risk businesses using low-risk processors like PayPal may face account freezes or terminations once their accounts are audited.
Risks of Using Low-Risk Processors for High-Risk Businesses
- Account freezes or terminations
- Funds held for up to 180 days
Corepay’s Tailored Solutions
At Corepay, we specialize in high-risk merchant accounts and provide bespoke solutions tailored to your business needs. Whether you’re high-risk, medium-risk, or low-risk, we offer transparent pricing and global payment acceptance to help you grow.
Why Choose Corepay?
- Specialization in high-risk industries
- Chargeback prevention tools
- Custom solutions for all risk levels
- Competitive rates and transparent policies
Get Started Today
Fill out an application with Corepay, and we’ll assess your risk level and recommend the best payment processing solution for your business. Let us help you minimize costs and maximize revenue.
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