8 important things to consider when opening a High Risk Merchant Account


High-Risk Merchant account payment processingSuccess of your Business depends on ability to sell – which means making it easy for your customers to buy. Cash isn’t easy and electronic wallets aren’t in yet, so accepting Credit Cards is your main venue. When you outgrow PayPal, Square and Stripe, here are the 8 most important items you will need to know about opening an account with a Merchant Service Provider.


1.  Be prepared to gather a lot of documentation. Your merchant processor will ask for:

  • Complete and signed application
  • URL – have your website up and running
  • Copy of D/L, passport
  • Utility bills
  • Credit history
  • Incorporation documents and/or other corporate docs
  • License and/or Legal Opinion (if applicable)
  • Business Plan
  • Recent bank statements, 3-6 months
  • Latest credit card processing statements 3-6 month
  • Warehouse fulfillment contract (if applicable)
  • Photos of your office/warehouse/location

2. You will have to post a Reserve. Reserve will be between 5-20% or 6 month rolling reserve.  This protects processor’s losses, the more comfortable your merchant provider is with you – based on the docs provided in #1 – the lower the reserve.

3. Sign a 2-3 year contract.  High-Risk merchant providers will want your commitment, a 2-3 year contract with a cancellation penalty is not out of the ordinary.  Penalty is normally called ETF – Early Termination Fee, read the agreement closely to understand what you are getting into.

4. Sign a personal guarantee.  High Risk means you pose more liability for the Merchant Service Provider, both Bank & Provider will want you to be on the hook as well.  Because the owners guarantee personally, posting a Reserve from the company will protect Guarantors by creating a financial cushion – Reserve isn’t always a bad thing.

5. Offshore versus Domestic.  Make sure you understand where the Acquiring Bank is located.  Offshore banks have their own pluses and minuses

  • Processing Credit Cards is a BIG PLUS. If all domestic processors decline you, go offshore
  • Cons:
    • declines can go up
    • foreign Corp set up – will cost $
    • deal with international laws
    • beware of third world country banks

6. Fees and Rates. High-Risk merchants will pay more than Low Risk guys.   The fees will reflect the liability created for Payment Providers but compare the fees through AllRates.org to make sure you stay competitive among High Risk rates.

7. Chargebacks.  If you don’t already, you will need a plan on how to manage Chargebacks.  Most likely you are a High Risk merchant because your industry is experiencing high percentage of chargebacks (above 1% is High).  There are tools to manage Chargebacks, a good description of how to go about it is HERE

8. IT Integration.  There are several ways to integrate with a Merchant Service Provider:

  • Hosted payment page. Easiest: simply redirect customers to a secure payment page
  • Inject a hosted payment page through iFrame. This allows you to keep customers on your website
  • Integrate through Processor’s API, will need an SDK file
  • Connect through shopping cart plug-in

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Next Steps:

1. Read What to look for when choosing a Merchant Service Provider
2. Click to Compare your rates on AllRates.org to see which Payment Provider gives you the best deal.
3. Get a free consultation for payment processing with AllRates analyst to discuss your particular needs for payment processing.