Glossary
High-Risk Merchant Account
A high-risk merchant account is a special type of bank account designed for businesses that operate within industries considered to be high-risk. These industries often include, but are not limited to, adult entertainment, CBD products, online dating services, gambling, firearms, and health and beauty sectors. Businesses in these fields tend to have a higher likelihood of encountering chargebacks and fraudulent transactions, which elevates their risk profile in the eyes of financial institutions and payment processors.
Due to the increased risks associated with these types of businesses, high-risk merchant accounts often come with stricter terms, higher processing fees, and additional requirements compared to standard merchant accounts. For example, the financial institution may require a larger rolling reserve, where a percentage of the transactions processed is held back for a certain period to cover potential chargebacks and disputes.
Moreover, businesses may face higher scrutiny during the application process for a high-risk merchant account. This can include detailed financial audits, thorough background checks, and a comprehensive review of the business model and operational practices.
Despite these challenges, having a high-risk merchant account allows businesses in these sectors to process payments and conduct transactions that might otherwise be unavailable through standard banking relationships. It provides them the necessary platform to operate legally and effectively, even under the strict regulations and higher risk conditions that their industries impose.