The Best High-Risk Merchant Account Providers

Matthew Speiser

Matthew is a staff writer at Fundera. He has written extensively about ecommerce, marketing and sales, and payroll and HR solutions, but is particularly knowledgeable about merchant services. Matthew's writing has been published in Business Insider, The Fiscal Times, and NJ.com, among others. He has a degree in journalism from the University of Delaware.

As a business owner, you need to accept credit card payments. However, not all merchant account providers are going to want to work with your business. This is especially true if you are what merchant account providers call a “high-risk merchant.”

A high-risk merchant is a merchant that merchant account providers consider to be a greater liability to work with than a “regular” merchant. This could be because they think your payments pose a greater risk of fraud, chargebacks, or that you will violate their terms of service, among other reasons.

If this is you, not all hope is lost.

There are actually a variety of merchant account providers that specialize in providing high-risk merchants with a merchant account—a special type of account needed to process credit card payments. However, navigating the high-risk merchant account provider market can be treacherous because merchants have very little leverage in negotiations. What often ends up happening is merchants get locked into a contract that ends up hurting their business more than it helps.

We don’t want that to happen to you, which is why we created a list of the best high-risk merchant account providers on the market. While we can’t promise you’ll get an amazing deal working with any of these high-risk merchant account providers, you should be able to at least work something out that won’t put your business at a disadvantage.

But before we get into our list, let’s learn a bit more about how high-risk merchant accounts work so that you know exactly what to look for in a high-risk merchant account provider.

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High-Risk Merchant Accounts: An Overview

Merchant accounts exist to mitigate the risk providers take on when processing payments. Merchants pay a fee to the merchant account provider for use of the merchant account (either interchange-plus pricing or tiered pricing) and in return merchant account provider facilitates the  processing of the merchant’s credit card payments through the merchant account and deposit them in the merchant’s business bank account.

The fees allow the merchant account provider to recoup some of their losses in the event of fraudulent charges and other issues that the merchant refuses to deal with (typically the merchant account provider has already deposited the funds into a merchant’s business bank account before the charge comes up as fraudulent).

Business owners must apply for a merchant account and go through an underwriting process. This is how a merchant account provider determines whether you are high risk or not. Different merchant account providers have different standards for what they consider “high risk.” Typically, having one or more of the following criteria can land you in the “high-risk” bucket:

  • Bad business or personal credit score
  • A history of fraud and chargebacks
  • Very little time in business
  • Having a U.S.-based business headquartered in another country
  • Selling “questionable” products or services (i.e. pornography or drug paraphernalia)
  • Having a high average purchase amount

If you are considered a high-risk merchant, you will have to pay more to process payments than a merchant that is not considered high risk. How much more? According to the merchant services provider ShopKeep, high-risk merchants can pay up to 1%-2% more per transaction than low-risk merchants. In particular, here is what you can expect with a high-risk merchant account:

  • Longer contracts: If you’re a high-risk merchant, your merchant account provider will probably try to get you to sign a long-term contract so that they can lock you in at rates that are favorable to them, even if you become lower risk over time.
  • Tiered pricing: Although some merchant account providers may offer interchange-plus pricing to high-risk merchants, it’s much more common for them to receive tiered pricing, which generally costs more per transaction.
  • Chargeback fee: This is a fee assessed by your merchant account provider on your account in the event of a chargeback. Generally, high-risk merchants have higher chargeback fees than low-risk merchants.
  • Automatic renewal clause: Another common feature of a high-risk merchant account contract is a clause that allows the terms of the contract to extend beyond the initial expiration date. You’ll need to look at your contract closely to determine when you need to give notice if you don’t want the automatic renewal clause to go into effect.
  • Early termination fee: If you want out of your contract before it reaches its expiration date, expect to pay an early termination fee. The fee you pay will depend on the terms you negotiate with your merchant account provider.
  • Liquidated damages clause: If the early termination fee isn’t bad enough, you may also have a liquidated damages clause in your contract, which specifies an additional amount of money you must pay for failing to meet the terms of the contract.
  • Keep a reserve: Some merchant account providers may require they keep an additional portion of your credit card sales as a hedge against fraud and chargebacks. There are three types of reserves a merchant account provider may require: rolling, up front, or fixed.
    • Rolling reserve: With a rolling reserve, a merchant account provider will withhold a portion of your daily sales for a specified period of time, and then gradually release the funds back to you.
    • Up-front reserve: An up-front reserve is an amount of money that must be placed in escrow at the start of a contract and not returned until the full value of the reserve is met in fees.
    • Capped/fixed reserve: With a fixed reserve, the merchant account provider withholds an additional percentage of every transaction until the reserve reaches an amount agreed upon in the contract.
  • Account freezes or terminations: If your account becomes more risky over time, you might experience account freezes where you can’t accept any credit or debit card transactions. If the issue persists, your merchant account provider may terminate your merchant account outright. This issue is particularly common with payment service providers like Square and Stripe. These types of businesses offer one large merchant account shared by all their clients. If one client becomes riskier than the others, it’s in the payment service provider’s interest to remove them from the account, rather than drive up the price for its other customers.

All of these things can have a negative impact on your business. Your goal is to find a high-risk merchant account provider that will offer you a contract with an affordable payment processing rate and as few of these drawbacks as possible. Our curated list of the best high-risk merchant account providers is a great place to start your search.

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The 3 Best High-Risk Merchant Account Providers

High-risk merchants want the same thing from their merchant account provider as any other business: a relatively reasonable rate, access to credit card readers, the ability to integrate with a point of sale (POS) system, and maybe a payment gateway if you’re an ecommerce merchant. Good customer service, pricing transparency, and month-to-month contracts are an added bonus. The following high-risk merchant account providers offer many of these good things while minimizing the aforementioned bad things:

Durango Merchant Services

Durango Merchant Services is unique in that it specializes in being a high-risk merchant account provider. On its website, it says it works with over 11,000 high-risk merchants across the United States. It also advertises merchant account solutions for a myriad of different business types, including credit repair businesses, e-cigarette and vaporizer businesses, dating sites, fantasy sports websites, pawnshops, firearm businesses, and more.

Durango Merchant Services works with a wide variety of payment processors. When you submit your business information to Durango, they will take it to their payment processing partners and come back to you with a quote. More highly qualified businesses can receive interchange-plus pricing, while less qualified businesses will likely receive tiered pricing.

Regardless of which pricing option you get, Durango Merchant Services does offer some other essential features. Merchants can select from four different credit card terminals, including both countertop and mobile options. All of the credit card readers support magstripe and chip card methods of payment, and two of the terminals also support contactless forms of payment. There is also a credit card reader that can plug into a mobile device.

Other features include a proprietary payment gateway, which integrates with most popular ecommerce platforms. All Durango Merchant Services customers also get a dedicated account manager who can handle any issues that may arise with their service.

In terms of contracts, Durango Merchant Services does not typically require an application fee or early termination fee. A liquidated damages clause and reserve clause is considered on a case-by-case basis. U.S. businesses can typically expect their processed payments to be deposited into their accounts within one to three business days. Other services Durango products include business loans and payroll management.

Payline Data

Payline Data is one of the most reputable high-risk merchant account providers, given that it also works with merchants that are not high risk. When you go through Payline Data, the company will connect your business with various banking and payment processing partners to help you find a solution that makes sense. Similar to Durango Merchant Services, the pricing you will pay depends on the overall quality of your business.

Generally speaking, Payline Data isn’t as lenient with the types of high risk merchants it will work with compared to Durango. But the Payline website still advertises solutions for many different types of high-risk businesses, including diet and weight loss programs, multi-level marketing companies, and online gambling websites.

If you can get a merchant account with Payline Data, you’ll get access to a lot of functionality. Payline Data can process ACH and e-check payments along with card payments, and deposit the funds in your business bank account within one to two days. There is also a chargeback prevention platform to help your business battle chargebacks and win more revenue. Payline Data’s payment gateway integrates with over 175 ecommerce platforms, and there is also a virtual terminal to accept “card not present” transactions.

In terms of credit card readers, Payline Data recommends two specific products. One is for mobile payments, while the other is for in-store payments. Let’s look at both:

  • Clover Go: This is a portable card reader that can accept magstripe, chip card, and contactless forms of payment, including Apple Pay, Android Pay, and Samsung Pay. The card reader syncs via Bluetooth with your smart device, allowing you to send text or email receipts, as well as provide suggested tip amounts.
  • Ingenico iCT220: This is a countertop device that can also accept magstripe, chip card, and contactless form of payment. The card reader also comes with enhanced security features and the ability to print paper receipts.

In terms of contracts, Payline charges a small monthly fee (around $10) but does not charge an application or early termination fee. Contracts are month-to-month and can be cancelled at any time. Liquidated damages and a reserve clause are considered on a case-by-case basis. Payline’s customer service is available by phone during normal business hours.

PaymentCloud

We’ll wrap up with another merchant account provider that specializes in high-risk merchant accounts. PaymentCloud is a relative newcomer to the market (founded in 2010) that does something quite similar to Payline Data: Shop high-risk merchants around to a variety of processing and banking partners in order to get them the best deal possible. However, PaymentCloud has one of the best track records in the industry in terms of getting high-risk merchants approved for a merchant account.

Similar to Durango and Payline, the rate you will pay for a high-risk merchant account with PaymentCloud varies depending on the level of solution they are able to deliver. What we can say is that there is no application, account setup fee, or early termination fee. PaymentCloud also says it can deliver the funds to your business bank account within 24 hours. What’s more, PaymentCloud offers a credit card and virtual terminal at no additional charge when you open an account. However, you’ll have to return the credit card terminal if and when you decide to close your account.

You can select from a variety of Ingenico and Verifone credit card terminals when setting up your account, all of which accept magstripe, chip card, and contactless forms of payment. PaymentCloud also sells MaxxPay POS hardware and software. Plus, PaymentCloud offers an Authorize.Net payment gateway, and allows for integrations with other third-party payment gateways. Merchant accounts can integrate with most major ecommerce platforms.

PaymentCloud has a customer service helpline that can be contacted during normal business hours. There is no monthly fee to use PaymentCloud, and contract specifics vary from merchant to merchant.

Finding the Best High-Risk Merchant Account for Your Business

If you are a high-risk merchant, understand that there are options available to you that will allow you to accept credit card payments at a reasonable cost. We feel the options we have provided are suitable for most high-risk merchants. Whatever high-risk merchant account provider you decide to go with, make sure you do your research on the company and read the terms of your contract carefully—you wouldn’t want to end up with something you can’t afford.

Remember, being a high-risk merchant doesn’t mean you have to get ripped off. By being a discerning business owner, you can make sure that your business gets the best high-risk merchant account possible.

Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone. They haven’t been reviewed, approved, or otherwise endorsed by any of the companies mentioned above. Learn more about our editorial process and how we make money here.

Matthew Speiser

Matthew is a staff writer at Fundera. He has written extensively about ecommerce, marketing and sales, and payroll and HR solutions, but is particularly knowledgeable about merchant services. Matthew's writing has been published in Business Insider, The Fiscal Times, and NJ.com, among others. He has a degree in journalism from the University of Delaware.

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