Merchant Accounts

PayPal High-Risk Merchant Account: Is It Right for Your Business?

July 22, 2023

As of March 2022, PayPal had 429 million active users. However, due to various reasons, only a small portion of this number are high-risk merchant accounts. Also, the number of PayPal merchant accounts keeps decreasing due to an alarming number of account closures.

That said, the aggregated payment services provider offers numerous benefits that could streamline business operations, even across the border.

If you’re thinking of opening a high-risk PayPal merchant account or have trouble recovering your account, this guide has everything you need. Read on as we take a closer look at PayPal merchant accounts, evaluating everything from what they are, how to open one, and what to do when your account is dropped.

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What Is a PayPal High-Risk Merchant Account?

As the name suggests, a PayPal merchant account is a payment processing account that allows high-risk merchants to conduct business on PayPal. This means the platform is not an actual merchant account but an aggregator or payment service provider that allows merchants to use part of their merchant account’s bandwidth to accept payments.

Opening a PayPal business account is easy. All you have to do is provide a few details and some documentation to verify your identity, and you can start receiving payments as soon as possible. However, as a high-risk merchant, your chances of having your account dropped are significantly higher than regular, low-risk merchants and private users.

That’s because PayPal has several limitations for industries it doesn’t work with. For instance, merchants in the adult entertainment and cannabis industries face difficulties when using the platform. This is primarily due to PayPal’s stringent and somewhat confusing policies. In some cases, the company blocks a merchant due to a violation of these terms. And in other cases, your account might get dropped due to a legitimate complaint from a customer.

Additionally, it is challenging to set up a PayPal merchant account on your own. That’s why it is advisable to work with third-party merchant account providers like Sharkpay Crypto, so they can help you set up and manage your account.

How to Open a PayPal High-Risk Merchant Account

You can open a high-risk merchant account with PayPal, but you have to follow the company’s guidelines and policies. For instance, any merchant in adult entertainment, cannabis, guns, and other high-risk and potentially illegal industries cannot open a PayPal high-risk account. Opening one without adhering to the company’s guidelines will leave you vulnerable to account closure and withholding of funds.

On the bright side, PayPal provides similar protection services to other high-risk merchant account providers. When creating an account, you can opt into services like chargeback protection, which comes at an extra cost. However, you’ll still be liable to pay an additional $20 for every chargeback, which can be challenging for small high-risk businesses to keep up.


Opening a PayPal merchant account follows the same procedure as opening a regular account. You can visit the company’s online sign-up page on the website and follow the prompts. While you’re at it, you may need to provide personal information, such as your name, email address, account number, and some documentation for underwriting.

Alternatively, you can choose to work with a third-party vendor with a history of working with the company. Third-party vendors often have more experience working with payment processors and can give you a better idea of what services to sign up for to improve your overall experience.

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Why Choose a PayPal High-Risk Merchant Account?

Despite the numerous industry restrictions imposed by the company, PayPal remains one of the most reputable and reliable payment service providers. It has a reputation for prioritizing security, which makes customers more willing to pay via the platform. Some other notable reasons to choose a PayPal high-risk account over regular merchant account providers include the following:

Trust and Recognition

People like working with businesses they trust. Over the years, PayPal has cultivated a culture of trust and reliability, particularly for ordinary customers sending money and paying for goods and services. As such, the PayPal logo on the cash-out page of your business can signal to potential customers that you are a trustworthy merchant.

Seller Protection

PayPal does more than process your credit and debit card payments. It also protects you from fraudulent customers. Besides chargeback protection, the company offers seller protection services that help prevent financial losses to your business in case a seller disputes receiving goods or services already delivered.

Easy Setup

PayPal has one of the easiest account setups available. The account setup page is well-designed, with clear boxes and illustrations to help you set up your account seamlessly. You can also contact the company’s support team to guide you through the process.


Multiple Currency Support

One of the biggest challenges facing international merchants is the inability to accept payments from certain regions or countries due to currency restrictions. PayPal can help you circumvent this problem by allowing you to accept payments in multiple currencies.

What’s even better is the company does the currency conversions for you and deposits the money directly to your account in your local currency.

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The Risk Associated With a PayPal High-Risk Merchant Account

While the company provides numerous benefits for businesses, it also comes with a few drawbacks. Some of the most notable drawbacks of using a PayPal merchant account include:

High Fees

PayPal does not have any monthly fees. However, it has high processing charges for online payments. As a high-risk merchant, you can also expect to pay even more fees for chargebacks.

Funding Delays

PayPal typically withholds funds for transactions it deems illegal or breaks any of its policies. The instances of funding delays are much higher for high-risk merchants compared to regular businesses.

Customer Preference

Although it’s widely trusted by customers, PayPal is not the easiest payment platform to use, especially for one-time customers who don’t use it regularly. Therefore, having PayPal as your sole payment processing provider may deter certain customers who find it hard to use the platform.

Account Dropping

PayPal has a reputation for freezing and dropping accounts at any time, sometimes without warning. The company’s guidelines are also very difficult to understand, increasing your chances of breaking their rules. The somewhat vague and complicated nature of the guidelines also gives the company full control over what happens with your funds and account.

The payment processing provider can also freeze your account at any time for various reasons, including the following:

  • Suspicious or unauthorized access to your account: PayPal employs various security bots that automatically detect unauthorized access to accounts. Any breach results in a temporary ban, which may take days or even weeks to resolve.
  • Regulatory compliance issues: Like other payment service providers, PayPal is required to adhere to federal and jurisdictional compliance regulations. As such, it reserves the right to suspend your account if it is out of regulatory compliance. This can include anything from accepting donations when not registered as a charity to accepting payments for goods and services not stipulated in your agreement.
  • Sudden change in your processing habits: Processing higher payments or having higher-than-average transactions can have your account frozen until you prove the validity and legality of the transactions.
  • Customer complaints against your account
  • Discovery of your account as a high-risk account when you had not disclosed the information before
  • Inadequate information in your account, as well as unverified accounts
  • A series of chargebacks placed on your account

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What to Do When Your High-Risk PayPal Account Is Dropped

While having your account dropped or suspended is challenging for your business, the company offers several avenues to plead your case and have your account reinstated. Here are a few tips on how to deal with PayPal business account suspension.

Find an Alternative Merchant Account to Accept Payment

PayPal account reinstatement is uncertain at best. It takes time, and in some cases, you may not have your account reinstated despite your best efforts. This can put a significant strain on the cash flow of your business. Therefore, as you wait to have your account reinstated, it is advisable to seek an alternative payment processing provider.

Figure Out Why Your Account Was Suspended

Before you proceed to reinstate your account, you must first figure out why your account was dropped in the first place. This can be any number of reasons, including the ones mentioned above.

Knowing why your account was dropped or suspended gives you a better chance at pleading your case or proving no wrongdoing on your part.

Appeal the Termination/Suspension

PayPal has a responsive customer service team and an account appeal portal where you can appeal your account’s suspension or termination. In this case, it’s best to go with the latter. Alternatively, you can file a report through the Better Business Bureau (BBB) and receive a response within two days. You can do this by following these steps:

  • Visit BBB.
  • Click on “File a complaint,” then click “Start your complaint.”
  • On the box “your complaint involves a:” choose the option “business’s product or service.”
  • You will then be directed to a page where you can search for the company in question. In this case, type PayPal and hit search. You will also be required to specify the PayPal office to receive the complaint.
  • Explain the matter to PayPal’s representatives.
  • Wait for a response.

The Bottom Line

Is PayPal right for high-risk businesses? Well, it depends on the specific industry you operate in and the products or services you provide. High-risk merchants dealing with products have a much easier time using PayPal than those selling intangible services with no tracking number or confirmation of delivery. Therefore, if you operate in the online space, it is better to go for a high-risk merchant account from providers who specialize in high-risk businesses.

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