Determining if You’re a High-Risk Merchant

This is a problem that many merchants face when searching for a payment provider. When running a high risk business, you may want to look for a payment provider that specializes in working with businesses like yours.
Redde Payments
5 min to read

Determining if You’re a High-Risk Merchant

Have you been told that your business is high-risk or have you been turned away from service providers due to your business model? This is a problem that many merchants face when searching for a payment provider. When running a high-risk business, you may want to look for a payment provider that specializes in working with businesses like yours. A high-risk payment provider can seamlessly work with your business providing merchant account benefits that offer the same peace of mind as a traditional merchant account. You can't always tell if you are a high-risk merchant. It's not something you can see or touch. But understanding what makes a high-risk merchant will make it easier for you to determine whether your business falls into that category or not.

High-Risk Business Types

High-risk merchants are often in the business of selling products or services that can be associated with a higher chargeback rate or a higher risk of fraud. Businesses that sell products or services over the internet, by phone, or through the mail are considered to be at higher risk of fraud than businesses that have a physical presence. These businesses can be vulnerable to fraud because it's easy for fraudsters to use stolen credit cards with their products or services. If someone steals a credit card number and uses it to make fraudulent purchases, the credit card company will likely reimburse the cardholder for those purchases. However, the credit card company will then go after the business that accepted that card on behalf of the fraudster. This means that even if your business is completely honest, it's still at risk if you process transactions either online, by phone or mail.

Because of this increased risk, high-risk merchants are often faced with more obstacles including risk reviews, a reserve account, processing limits, funds on hold or even account closures. These risk factors can be very disruptive to you and your business. Many business owners are unaware of the high-risk tolerance of their payment provider. To prevent problems, it's important to know whether or not your company is considered high risk.

4 Factors That Lead to a High-Risk Classification

There are four main categories that lead to a high-risk classification:

Let's explore these categories below.

Chargeback Ratios

The first and probably most important category in determining if your business is considered high-risk is chargeback ratios. Chargeback ratios are the number of disputes your business is receiving within any given time frame in comparison to your sales. By industry standards, most payment providers want your business to have a chargeback ratio under 1% within any given time period. Having ratios close to 1% can easily label your business as high-risk. This means your payment provider will monitor your account for an increase in chargebacks and might ask you to take certain actions to reduce the number of disputes. If your ratio goes over 1%, you can be terminated and have a tougher time getting a new merchant account.

Industry Type

The second category is industry type. Depending on the type of business you operate, your industry can easily lead to a high-risk classification. For example, e-commerce merchants are generally known to be higher risk than other industries because they can deal with high-ticket items. High-ticket items are products that generally cost more in comparison to others. These items can include: computers, televisions, sports equipment and jewelry. Other high-risk industries include:  

  • Entertainment venues - Considered high-risk due to their future deliveries, ticket sizes and that they are generally card-not-present.
  • Credit repair - Considered high-risk due to concerns about their quality of service, recurring billing and ticket sizes.
  • MLM - Considered high-risk due to concerns about their quality of service and products not being as described.
  • Collection agencies - Considered high-risk due to legal and regulatory concerns.
  • Dropshipping - Considered high-risk due to fulfillment concerns.

Although many businesses that fall into the above categories might not have any of the problems described, it's important to understand that payment providers may have some pre-conceived notions about your industry type.

Processing Volume and Ticket Size

The third category is processing volumes and ticket size. Processing volume refers to how many transactions a business processes in a given time period. A low-risk merchant can be someone who runs up to $100,000 a month, whereas a high-risk merchant can generally run over $100,000 a month. Keep in mind, volume isn't the only factor. You can have a merchant who runs $5,000 a month be considered high-risk. The difference is that if you know a particular business category has fewer disputes, metrics can help you determine if a merchant is high-risk or not based on volume alone.

Ticket sizes are also considered when determining if a business is considered high-risk or not. The amount of money that a customer pays in one transaction is called "ticket size". You should be aware that there are two types of ticket sizes that your payment provider may want to review:

  • High Ticket -  The maximum amount a customer should pay for one transaction.
  • Average Ticket -  The average amount a customer should pay for one transaction.

As the amount of a transaction or processing volume increases, the greater risk you are to your financial institution if customers file disputes against you. This is why processing volume and ticket sizes are factors in determining if your business is high-risk.

Geographical Location

The fourth and final factor considered when deciding if your business is high-risk is geographical location. Your business and customer's geographical location can play a role in the risk assessment process by your payment provider. For example, if your company is located in the US but most of your customers are in France, there are greater shipping delays to consider, higher fraud claims and higher currency conversion costs. Geographical locations are mostly considered high-risk due to shipping delays. However, this is one factor that will come into play when your payment provider is determining whether or not your business is a good risk.

How to Set up a High-Risk Merchant Account

Setting up a high-risk merchant account isn't as simple as it sounds; there are several steps you'll need to take before you can start accepting payments. First, you’ll need to find a service provider who will work with you. We suggest you start with Redde Payments! You'll need to fill out an application form, provide proof of identification and submit personal information about yourself and your business. Choosing a good service provider that can help guide you through these questions is crucial and it's recommended that you take the time to find the right one. At Redde, we specialize in high-risk merchant accounts. We put time into understanding each client's business, one-by-one. This means you'll get the best solutions with even better support. We are here to help you make the most of your account and ensure that it will last a long time.


Understanding the conditions that make your business high-risk is important if you want to get a high-risk merchant account. If you're looking for a high-risk merchant account, then you may already know that it can be difficult to find exactly what you need. There are many companies which will try to convince you that they have the perfect plan for your business, but the truth is that most of them simply cannot deliver the kind of service that you need. As a consumer with lots of options, it can be very challenging to truly understand what makes one merchant service provider stand out above all others. There are a lot of options out there, which makes it difficult to find the best one. We're here to help you through the tough decisions and help you choose something that's right for you! If you have any questions about what makes you a high-risk business or if you need any further clarifications, chat with any one of our representatives via our live chat today!

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