Differences Between Low- & High-Risk Merchant Accounts

A payment processor will always assess your risk level before providing you with a merchant account. This assessment will determine the rates you pay. It may also limit your merchant account options. There are several key differences between low-risk and high-risk merchant accounts:

Feature	Low-Risk Merchant Account	High-Risk Merchant Account
Account Fees	Low or no monthly account fees	Higher monthly account fees
Transaction Fees	Lower per-transaction fees	Higher per-transaction fees
Documentation Required	Minimal documentation and scrutiny required to open an account; just government ID, business licences, and recent bank statements	Strict review and high scrutiny, including 3 to 6 months of processing statements, bank statements, and chargeback readiness documentation
Rolling Reserve	Generally no rolling reserve	A percentage of each transaction (usually 5 to 20 per cent) held back as a rolling reserve
Contract Length	Shorter contract lengths or no contract requirement	Longer contract lengths (as much as three years and possibly more)
Early Termination Fees	Possibly no early termination fee	Fees for cancelling and/or early termination
Card Processing Limits	Fewer card processing limits	Strict monthly card processing limits

Please note: If a high-risk merchant account is your only option, it is still usually better than not being able to accept credit and debit card payments at all.

Low-Risk Merchant Accounts

Low-risk merchant accounts, also known as regular merchant accounts, are those that facilitate credit and debit card payments for merchants for a small fee. After these transactions are settled to the merchant account and any fees and refunds are taken out, the remaining amount is settled in full to the merchant’s business bank account.

Medium-Risk Merchant Accounts

Medium-risk merchant accounts are classified as those that are more financially vulnerable than low-risk accounts but not quite in the same league as a high-risk account. Industries like health and beauty, software-as-a-service (SaaS), and subscription services are often considered medium-risk. They may have moderate average chargebacks (1 to 1.5 percent) and moderate ticket sizes (€50 – €500).

High-Risk Merchant Accounts

High-risk merchant accounts are designed specifically for high-risk merchants (more on this below). High-risk accounts typically come with higher credit card processing fees and restrictions that don’t apply to low-risk merchant accounts. These may include caps on the merchant’s monthly processing volume or the requirement to maintain a rolling reserve.

With a rolling reserve, the payment processor withholds a percentage of each transaction (usually between 5 and 20 per cent) to cover any chargebacks or refunds. The funds are usually withheld for 90 to 180 days. Some payment processors may impose a capped reserve, which is like a rolling reserve, but the high-risk payment processor stops withholding once the reserve reaches a specified balance.

Capped reserves and rolling reserves can adversely impact the merchant’s cash flow by delaying access to a portion of their capital. This can be especially challenging in the first 90 to 180 days, before the first round of withheld funds is released.

How Low-Risk and High-Risk Merchant Accounts Differ

Low-risk, medium-risk, and high-risk merchant accounts differ in merchant qualification factors and account conditions.

Parameter	Low-Risk Account	Medium-Risk Account	High-Risk Account
Chargeback Ratio	Below 0.9% (Ideal <0.5%)	0.9% – 1.5%	>1.5% (Tolerated up to ~2%)
Monthly Sales Volume	< €20,000 / month	€20,000 – €100,000 / month	> €100,000 / month (or uncapped)
Average Ticket Size	< €50	€50 – €500	> €500
Processing Fees (Avg)	1.5% – 2.5% + €0.10	2.5% – 3.2% + €0.20	3.5% – 5.0%+ + €0.30+
Rolling Reserves	None (0%)	0% – 5% (conditional)	5% – 20% (for 90–180 days)
Approval Timeline	Instant to 24 hours	2–5 business days	1–3 weeks (manual underwriting)

Key Definitions

Make sure you understand the central terms relating to low-risk and high-risk merchant accounts:

• Chargeback Ratio: A measure of how often customers dispute transactions with their bank. A high chargeback ratio means a higher number of customer disputes.
• Monthly Sales Volume: Payment providers look at monthly sales volume to better understand a business’s activities. Higher monthly sales volume, or a sudden spike in sales volume, sometimes indicates a higher level of risk.
• Average Ticket Size: This refers to the typical value of a transaction. Larger transactions mean higher potential losses in the event of a dispute. That is why they’re deemed higher-risk.
• Processing Fees: A typical processing fee includes a percentage of each sale plus a fixed transaction fee. Merchant providers typically impose higher processing fees on medium- and high-risk businesses to help mitigate the added risk and pay for the additional oversight and fraud detection tools.
• Rolling Reserves: Higher-risk merchant accounts may be subject to rolling reserves, in which a portion of each transaction is temporarily withheld to cover any potential refunds or chargebacks.
• Approval Timelines: Merchant applications from high-risk businesses require manual underwriting, which takes longer to process. Sometimes it can take weeks.

Why Acquiring Banks Classify Merchants by Risk

Acquiring banks are concerned with whether a business can fulfil its orders and cover its chargebacks and refunds after payment has been received. Underwriters will look at several factors, including when customers pay, how they pay, and whether the business has the track record and funds to meet its financial obligations.

Several factors have been shown to influence a merchant’s risk classification:

• Future-Delivery Exposure (Lag Time): Certain types of businesses, like ticket sellers and custom manufacturers, may collect payment months before the product or service is provided. The longer the lag time, the greater the risk of the company going out of business, being unable to fulfil the order, or losing the customer’s interest. This can result in higher chargeback rates.
• The Payment Channel: E-commerce is inherently riskier than in-person POS terminals. A card-not-present (CNP) transaction carries a higher risk of fraud than a card-present (CP) transaction because only the card number is required.
• Merchant Activity: Acquirers continuously monitor activity in accordance with card-network rules. For instance, Visa’s Acquirer Monitoring Program (VAMP) measures instances of fraud and disputes for all card-not-present transactions. In the European Union, the excessive-merchant threshold is set at 1.5 per cent. Mastercard’s ECP has its own threshold that it monitors. Exceeding these thresholds can result in penalties for the merchant, including stricter scrutiny, higher fees, or the termination of their merchant account.
• Additional Factors: Banks assign a merchant category code (MCC) to each business, highlighting the types of goods and services it offers. But while the MCC sets initial risk baselines, risk tiers can shift based on factors like individual processing history and owner credit history. You can’t rely on your industry alone to determine your risk level.

Examples of Low-, Medium-, and High-Risk Industries

This list of low-, medium-, and high-risk industries is a generalisation only. There are other nuanced details that determine the risk level of a business, including company size, history, and country of operation.

Low-Risk Industries	Medium-Risk Industries	High-Risk Industries
Automotive/auto parts Food services Hospitality Household goods Office supplies Online apparel Pet supplies Professional services (doctors, architects, etc.)	General subscription and recurring billing Health and beauty products Legal services Life coaching and personal development Subscription software (SaaS) Travel agencies	Adult entertainment Brokerage firms Cannabis Crypto Dating services Gaming Online gambling Tech support Telehealth Telemarketing Timeshares

A low-risk merchant account has a low statistical likelihood of costing the bank money or attracting rampant fraud. As such, the payment processor considers it a smart (or at least a safe) financial investment.

A medium- or high-risk industry has a higher statistical likelihood of attracting fraud or disputes. Banks and traditional payment processors often deny high-risk merchant accounts for the same reason that lending institutions deny loans to risky borrowers: because the client may ultimately end up costing the bank money. If a merchant services provider does grant services to a high-risk business, it will usually impose much higher fees to help mitigate the risk.

What Makes Some Industries High Risk

An industry is considered high risk if it has a high chargeback ratio (i.e., customer disputes), a significant degree of fraud, or a legally problematic product or service line. If your business is part of such an industry, you may be subject to higher transaction fees and greater restrictions.

You might also be required to maintain a merchant account reserve, which works like a security deposit. If you neglect to pay any required fees or penalties, the money is taken from the reserve, and your merchant account is terminated.

Chargebacks

A chargeback occurs when a customer demands a refund from the bank. For example, if a customer pays for your three-week personal growth course and then feels ripped off when they don’t achieve enlightenment, they might complain to their bank. They might demand a refund even if your personal growth business is legitimate. The bank will usually refund the money and then hold you accountable for the full cost plus fees and penalties.

Chargebacks are inevitable in most industries. However, a high chargeback ratio is a huge red flag to payment processors. If your business has too many chargebacks, this can lead payment processors to suspect that either:

1. You’re cheating your customers (e.g., a tech support scam)
2. Your type of business operations attract dishonest or dissatisfied customers (e.g., online gambling)

Either way, it’s bad news for the payment processor. That’s why they monitor chargeback ratios (the percentage of transactions that result in chargebacks). A chargeback ratio that consistently sits at or above 1 per cent is considered high risk. Even if your business is part of a low-risk industry, you will still be flagged as a high-risk merchant and could even be placed on the TMF/MATCH list if your chargebacks remain high.

Fraud

Industries with high levels of fraud are automatically deemed high risk. That’s because dishonest businesses attract excessive chargebacks, lawsuits, and complaints. They can jeopardise the reputation of the merchant services provider, and they often disappear without a trace, leaving the merchant provider on the hook for all acquired debt.

Unfortunately, many honest and reputable businesses are treated as high risk simply because of the industry in which they operate. Tech support is a perfect example. Most tech support businesses are upstanding and legitimate. However, because tech support fraud is still rampant (the FBI received complaints from over 47,000 victims of tech-support scams in 2025, see page 7 of the PDF), all tech support businesses endure a higher level of scrutiny.

Legal Concerns

Some industries, like cannabis, pornography, and online gambling, are subject to wildly varying international laws. This can create significant liabilities for the payment processor.

Consider the marijuana industry in the United States. Because state and national laws are often at odds, legal cannabis is still predominantly a cash business. As a result, these businesses are often the subject of crime and are even shut down by the authorities on occasion. It’s a volatile enterprise.

There are also cases in which a business is ethically problematic, such as an online retailer that sells imitation Gucci bags. A reputable payment processor is unlikely to risk its reputation and legal standing by partnering with such an enterprise.

What Makes Some Industries Low Risk?

An industry is considered low risk if it yields a consistent return on investment for the payment processor. In other words, the merchant services provider can confidently extend service knowing that, statistically speaking, it won’t be bombarded with chargebacks or complaints and that the merchant is unlikely to disappear with unpaid fees.

It’s not enough to be part of a low-risk industry, though. Your business’s level of risk is dictated by three additional factors:

• The strength of your business
• Your monthly sales volume
• Your chargeback rate

You may be able to secure lower merchant fees even if you’re in a high-risk industry if you can demonstrate strength in the other three areas.

The Strength of Your Business

When assessing your business, a merchant services provider may consider factors like your credit score and the number of years you have been in operation. New businesses or business owners with a bad credit score are sometimes held to a higher level of scrutiny than those with a proven legacy. The good news is that you can still open a merchant account with a bad credit score.

Your Monthly Sales Volume

The more money your customers spend, the greater the bank’s potential exposure. If your monthly sales are at or below €20,000, you should have no trouble remaining in the low-risk category, at least for this criterion. The ticket size is also important. If your average sale exceeds €50, you may be deemed higher risk.

Your Chargeback Rate

It’s not enough to belong to an industry with a low average chargeback rate. To keep your rates low, you must ensure that your chargeback ratio remains low to zero. Otherwise, your merchant account may be placed in a higher-risk category or terminated altogether.

How to Know if Your Business Is High-Risk or Low-Risk

Your industry is the most important factor in determining your risk level. Certain industry descriptors, like adult entertainment, gambling, and tech support, will automatically flag you as high risk.

If your industry is low- to medium-risk, the next step is to honestly assess the strength of your business.

Low Risk	High Risk
Established business	Newly formed or penalised business
Chargebacks below 1%	Chargebacks above 1%
Average monthly sales below €20,000	Average monthly sales above €20,000
Average ticket size below €50	Average ticket size above €50

You ideally want to be in the low-risk category. After all, low-risk businesses:

• Pay the lowest merchant fees
• Have access to more merchant features like point-of-sale solutions
• Have access to more payment methods, currencies, and countries
• Have the best chance of being approved by their preferred merchant provider
• Typically aren’t required to open a merchant account reserve

You still have options if you find yourself in the high-risk category despite your best efforts. Your next step is to find a payment processing provider that supports high-risk merchant accounts. You preferably want a merchant provider that will afford you their full services without charging you an exorbitant amount.

How to Have Your Business Reclassified as “Low Risk”

There are several things you can do to move from a high-risk merchant account into a low-risk one:

1. Implement Chargeback Mitigation Tools: Companies like Unicorn Group offer comprehensive chargeback prevention tools to help keep merchants’ chargeback ratios at a minimum.
2. Adjust Billing Descriptors: Ensure descriptors show the recognisable brand name rather than a parent holding company.
3. Build a 6–12-Month Processing Track Record: Use clean processing history to negotiate lower reserves or fee reductions.
4. Optimise Fulfilment Timelines: Reduce delivery lag times to decrease chargebacks related to late delivery.

Frequently Asked Questions About High-Risk Merchant Accounts

What is a high-risk merchant account?

A high-risk account is a type of merchant account that is subject to higher scrutiny and often higher fees by merchant account service providers to mitigate the increased risk to the provider. This may be due to a higher likelihood of fraud or chargebacks. Having a high-risk merchant account does not mean your business is disreputable. It often just means that similar businesses have proven risky for merchant providers.

How much do high-risk merchant services cost?

For a high-risk merchant account, a merchant provider may impose a processing fee of 3.5-5.0 per cent (average), sometimes higher. You may also be subject to monthly account fees and other charges, which vary. It’s important to shop around. You can often find better rates than other high-risk merchants if you’re diligent about comparing your options.

Why is my business considered high-risk?

Your risk level is often determined by your industry. Any industry with age restrictions, tight legal regulations, or a high likelihood of fraud will be deemed high risk. In some cases, the risk level may be determined by the country where you operate or your existing chargeback ratio.

Which countries are considered high-risk for merchant accounts?

Some countries and jurisdictions are specifically flagged due to high fraud rates, regulatory concerns, or a history of money laundering. Examples of high-risk nations include Myanmar, Syria, Yemen, Belize, and the British Virgin Islands.

Can I lower my business’s payment risk over time?

In many cases, yes. If you maintain a low chargeback ratio and remain a business in good standing, you can often negotiate a lower rate after establishing a positive track record. It’s important to have a clear refund policy, maintain good relationships with customers, and have cutting-edge fraud detection tools in place.

Can a low-risk merchant become high-risk?

Yes. Your risk level can change based on your chargeback ratio as well as any activity that a payment processor deems risky or suspicious. For instance, if a low-risk merchant experiences a sudden spike in sales, such as due to a viral product launch, the seller may be moved to a high-risk category.

Because of this concern, many aggregate low-risk processors like Stripe and PayPal have been known to freeze funds for businesses that suddenly achieve a revenue spike. It’s one way that they mitigate their own risk, and it’s one of the reasons why using aggregate processors can be extremely risky.

Show That Your Business Is Low Risk

High-risk payment processing is a fact of life for businesses in certain industries. It can also be a temporary solution for businesses that are new, have a large ticket size, or have developed a high chargeback ratio. While a high-risk merchant account comes with higher fees and stricter regulations, it ultimately allows you to take card payments rather than being forced to deal only in cash.

When applying to merchant account providers, make sure to gather the documents you need to open a merchant account. Provide as much evidence as you can to show the strength of your business model, your chargeback ratio (which is hopefully low), your monthly sales volume, and your trustworthiness. Providers will consider all these factors during the underwriting process and hopefully offer you a competitive rate.

Published: December 27, 2023
Last updated: October 2, 2026