Credit Card Processing

High-Risk Credit Card Processing Fees Explained

July 17, 2023

As a high-risk business owner, you already expect to pay more credit card processing fees. But by how much exactly? Depending on the specific industry you operate in and the potential for fraud and chargebacks, merchant account providers will charge you varying fees. By looking at the average amounts charged by different credit card processing companies and merchant account providers, you can come up with a viable estimate.

This guide will delve into the intricacies of credit card processing fees, including clear guidelines on low, medium, and high-risk credit card processing fees explained.

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What Is High-Risk Credit Card Processing?

Most major banks associate certain businesses with higher financial risks, prompting them to impose higher processing fees. In some cases, banks may refuse to work with specific businesses, thus limiting their capability to serve customers.


That’s where high-risk credit card processing comes in. Numerous high-risk merchant account providers specialize in serving high-risk businesses by enabling them to accept and process credit card payments but at a cost. Like banks, high-risk merchant account providers also charge a higher rate for high-risk businesses.

There’s no framework or governing authority in the payments industry that determines the fees charged or the risk factors associated with high-risk businesses. As such, every bank and credit card processor sets their own standards, resulting in varying fees for different businesses.

Factors Contributing to High-Risk Categorization

Despite the regulatory leniency imposed on banks and credit card processors with regard to high-risk categorization criteria, most financial transaction processing companies consider similar factors when determining a business’ risk factor. They include the following:

Chargeback Ratio and Fraud Exposure

Some businesses are more likely to get chargeback requests than others. For instance, subscription-based service providers get more chargeback requests than brick-and-mortar stores dealing in regular products like groceries.

If the business or industry you work in has a history of higher chargebacks compared to the total number of completed financial transactions over a period of time, your business is more likely to be categorized as a high-risk business.

In this regard, credit card processing companies look at the percentage of chargeback requests in the total number of completed transactions. Any business with a chargeback rate above 1% is generally considered a high-risk business.


Products and Services Sold

Businesses dealing in highly-regulated products, or products with a controversial legal standing like cannabis, adult entertainment, and pawn shops, to name a few, are generally considered high-risk.

Credit Score

As a high-risk merchant, your credit score also plays a role in the risk evaluation of your business. For instance, merchants with a credit score below 400 may have their businesses considered high-risk.

Banks and other financial institutions that provide credit card processing services make this general assumption on the grounds that, like with a loan, they might not end up getting their money back, prompting them to associate your business with a higher risk.

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Business Practices

Some businesses have pretty unscrupulous practices. For instance, Multi-Level Marketing (MLM) businesses are widely regarded as scams. Therefore, banks are less willing to work with them owing to the high legal and financial risks involved.

High Ticket Sales

High ticket sales are not always a good thing, at least not when it comes to finding a credit card processing company willing to partner with you. Businesses that accept high transaction amounts, usually above $3,000, are generally considered high-risk businesses.

The notion behind this is pretty straightforward. If any transaction turns into a chargeback, the account provider stands to lose more money, thus adding to the risk.


What Is a Low-Risk Merchant Account?

Low-risk merchant accounts are the exact opposite of high-risk merchant accounts in every regard. Unlike high-risk merchant accounts, which typically have a high chargeback ratio, low-risk merchants operate with little to no chargebacks and have a strong financial history.

Some of the best examples of low-risk accounts include pet supplies, retail stores, parking garages, auto part stores, and bookstores. The most common similarity among these businesses is that most of their transactions are card-present (CP) transactions, whereby the credit card holder makes the purchase in person, which results in relatively limited chargebacks.

Some of the factors that contribute to low-risk categorization include the following:

  • Average ticket sales of below $50
  • Fewer card-not-present transactions
  • Low chargeback ratio
  • Process less than $20,000 a month
  • A business that rarely experiences fraud
  • Good personal credit
  • The industry the business operates in is deemed less risky

What Is a Medium-Risk Merchant Account?

As the name suggests, medium-risk merchant accounts pose fewer risks than high-risk merchant accounts but slightly higher risks than low-risk merchant accounts. Some of the most common businesses that fall under this category include health and beauty, attorneys, political party organizations, telecommunication services, and utility payment providers.

The most common factors that contribute to medium-risk categorization include the following:

  • Average monthly processing volume of between $20,000 and $100,000
  • Average ticket sales of between $50 and $100
  • Relatively good personal credit

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High-Risk Credit Card Processing Fees Explained

As a high-risk merchant, there are different types of fees you can expect to pay. They include:

Setup/Registration Fees

Most credit card processing companies charge a standard registration fee. These fees vary across various companies, with some companies waiving the fees altogether. With that said, you can expect to pay anywhere between $100 and $500 to register your account. Most companies, including all major credit card brands like Visa and Mastercard, also charge an annual registration fee of about $1,000.

Refund Fees

Refund fees apply in case of chargebacks. For instance, if a customer purchases an item, then decides to return the product, you are entitled to a 2.5% processing charge refund of the 3% initially charged by the credit card processing company. While most companies offer refund fees, others don’t, thus necessitating the need to work with a transparent merchant account provider.

PCI Compliance/Services Fees

PCI compliance fees are paid to your merchant account provider to ensure that your merchant account meets all PCI DSS requirements. These fees are not standard for all high-risk merchant accounts. While most processors charge it, some may facilitate the compliance for free as a value-added service, while others leave it to the merchant to ensure their own compliance.

You should also note that these fees vary from processor to processor and across various industries, with an average charge of about $19.99 to $125 per month.

Chargeback Fees

Chargeback fees are standard charges for all high-risk accounts. These fees are charged on a per-chargeback basis, and the merchant is fully liable to pay their credit card processor. Chargeback fees can range anywhere between $10 and $100.

On the bright side, most reputable merchant account providers like Sharkpay Crypto offer chargeback mitigation services to help you reduce your chargeback ratio.

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Reserve Fees

Reserve fees are quite common among high-risk accounts. They are meant to protect the credit card processing company from financial losses when handling your account, especially when it comes to chargebacks.

The most common type of reserve fee is a rolling reserve. Rolling reserves are funds from your credit card processing provider held in reserve for a period of six months or one year to serve as a guarantor. These fees are calculated in the form of a percentage and generally range from 5% to 15%.

Early Termination Fee

Early termination fees apply when a merchant decides to terminate their merchant account before their contract’s end date. These fees are typically done in two ways; as a flat fee or as a liquidated damage fee.

The former is a one-time payment that you pay, then move on. Liquidation damage fees, on the other hand, might be troublesome if you decide to terminate your account years before your contract’s end date. In this case, you are required to pay processing fees for the years stipulated in your contract, which can be quite significant.

Low-Risk Merchant Account Processing Fees

Like with high-risk accounts, low-risk merchants also have to pay credit card processing fees. These fees vary greatly from company to company, with some companies charging lower than others. The most common types of fees associated with low-risk merchant accounts include:

  • Transaction fees: Often range between 1% to 3% of the transaction value
  • Monthly fees: These fees are typically meant to maintain your merchant account. They range from $10 to $50 for most companies.
  • Chargeback fees: Even low-risk merchants get chargebacks, only at a much lower rate than high-risk merchants. For low-risk merchant accounts, these fees can rack up to $15 to $50 per incident, depending on the transaction value.
  • Additional fees: Additional fees include PCI compliance, account setup, statement generation, and customer support. These fees vary according to the processor, with some processors waiving most of these fees.

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Medium-Risk Merchant Account Processing Fees

As a medium-risk merchant, you can expect to pay slightly higher fees than low-risk merchants. Some of the most common fees associated with medium-risk merchant accounts include:

  • Application fee: Some merchant account providers may charge an application fee before allowing you to submit your application. However, this is not very common.
  • Discount rate: The discount rate is a percentage of each transaction that the merchant processor charges to process your transactions.
  • Transaction fee: In addition to the discount rate, some credit card processing companies may also charge you a small transaction fee ranging from $0.20 to $0.50 for each transaction.
  • Rolling reserve: Like with high-risk accounts, medium-risk merchants often have to pay a rolling reserve fee of about 5% to 15% of the transaction volume, usually held for about six months or one year.
  • Chargeback fees: Typically ranging from $20 to $50 per occurrence
  • Additional fees: These fees vary among merchant account providers, with some providers waiving certain fees altogether. Additional fees may include monthly account maintenance fees, monthly minimum fees (if your transaction volume is low), PCI compliance fees, and statement fees.

The Bottom Line

Knowing how much money you are expected to part with when setting up a merchant processing account will not only help you plan ahead but also help you find a reliable, transparent merchant account provider. These charges vary among merchant account providers, so you may want to compare a few providers before making a decision.

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