How to Get Approved for a High-Risk Merchant Account: Step-by-Step Guide

In today’s digital age, a merchant account is a necessity to accept payments and succeed in a competitive industry. However, certain businesses face repeated rejections, higher fees, and strict regulations to maintain their merchant accounts. Most payment processors often hesitate to work with high-risk merchants, preventing them from credit card processing and other essential financial services.

Businesses are considered high-risk if they have high chargeback rates, strict industry regulations, and potential for fraud. Businesses in highly regulated industries, such as CBD, travel, online gambling, adult entertainment, and dietary supplements, are considered high risk even when they do not have any financial issues.

The application and approval of a high-risk merchant account is a challenging process. Businesses often face rejections, account closures, and more regulations that disrupt their operations. But with the right strategy, documentation, and processing partners, businesses can improve their chances of approval. This blog is a comprehensive guide to help you secure a high-risk merchant account for your business. We discuss critical steps to follow and mistakes to avoid for smooth business operations with a merchant account.

What is a High-Risk Merchant Account?

A high-risk merchant account is used by businesses that are prone to financial or regulatory issues. Payment processors label businesses as high risk if they have high chargeback ratios, reputational concerns, past incidents of fraud, legal complexity, or financial instability.

Industries considered to be high-risk are:

CBD and cannabis products
Adult entertainment
Travel and booking services
Subscription-based services
Online gaming and gambling
Nutraceuticals and diet supplements

High-risk merchant accounts usually have higher service fees, stricter policies, and increased scrutiny from underwriters. However, they enable businesses to operate legally and receive credit card and other digital payments. As most customers use these forms of payment, businesses can not function properly or offer a good customer experience without a merchant account. Understanding your risk classification and selecting the right payment processor is the key to a quick and seamless approval.

Step-by-Step Guide to Getting Approved

Here is a step-by-step guide to getting your merchant account approved.

Know Your Risk Profile

The first step in the application process is understanding why your business is considered high-risk. Processors evaluate criteria such as industry classification, business model, chargeback ratio, processing history, and financial stability. Assess all these factors to determine the chances of approval.

Knowing your risk profile also helps you address all the red flags in your application. If you have a high chargeback rate, mention the measures you have taken to lower it. Knowledge of the rules and regulations of the industry, as well as evaluation criteria, will help you create a strong application. Tailor your application to turn every challenge into an opportunity.

Gather Key Documents

Collect all the required documents in advance to avoid any delays or rejections. Most applications require

A government-issued ID (license or passport)
Business license or incorporation documents
Tax identification number
Recent bank documents (usually 3-6 months)
Previous processing documents
A functional website with clear policies

Make sure all the documents are current, clear, and coherent. Any error, such as a mismatched business address or contact info, can lead to unnecessary hassles and scrutiny. A properly prepared documentation signals to the processor that your business is reliable, organized, and compliant.

Build A Strong Application

The application is your pitch to get approval for your business account. Highlight how you make your business viable by managing risk. A clear and realistic business plan reflects your vision and efforts to carry out a successful business. Also include projected sales, growth forecasts, transparent return/refund policies, and other business details.

Be transparent about chargeback rates, monthly sales volume, industry experience, and business model. Such transparency is better than surprises during the underwriting stage. Also, highlight your risk mitigation strategies, such as reducing chargebacks and preventing fraud through a secure checkout process and the use of anti-fraud tools. Your application should reflect your business’s ability to stay financially stable and compliant.

Choose the Right Payment Processor

Most payment processors are not equipped to work with high-risk businesses. Research about experienced processors that offer transparency, reliability, lower costs, and scalability. Providers that specialize in high-risk industries have the knowledge and expertise to assist your business’s growth.

Consider the following factors before selecting a payment processor:

Deep understanding of your industry
Reasonable and transparent fee structure
Tools for chargeback protection
Multi-currency and international payment support
Positive reviews and reputation
A responsive customer support
Tools for fraud detection
Integration with current systems.

All these features are essential for the long-term growth and success of the partnership. Research and apply selectively to processors that meet your business and industry needs.

Optimize Your Website

During the application process, your website will be thoroughly inspected. Make sure the website includes the following:

SSL certification (secure https connection)
Clear terms and conditions
Refund and privacy policies
Product description and pricing
Company contact information (name, address, phone number)

Make sure all this information is clearly mentioned on the website wherever applicable. If there is an age restriction in your industry (18+ for the cannabis industry), include age verification and legal disclaimers where appropriate. A professional, clear, and secure website signals the trustworthiness of your business, a critical factor for approval.

Be Transparent Throughout the Process

Transparency is the key to a seamless application process. Disclose your previous processing history, along with any chargeback, account closure, or fraud incidents, to the underwriters. Trying to hide or cover problems can result in immediate rejection or blacklisting of your business.

Be responsive to the underwriting team and offer any additional information or documents promptly when requested. Most underwriters ask for clarification on your business model, marketing methods, or operational process. Quick and honest communication reflects the credibility of your business and speeds up the approval process.

Reduce Risk Where Possible

Fraud and chargebacks are the factors that lead to the decline of your application. The lower the perceived risk of your business, the higher the chances of approval. Take these measures to reduce risks:

Use fraud prevention tools such as AVS, CVV, and 3D Secure
Maintain a chargeback ratio under 1%
Offer clear customer service and return/refund options
Train staff to handle disputes and reduce escalations

A business with a history of low chargebacks, responsive customer support, and compliance practices is appealing to payment processors.

Common Mistakes to Avoid

Avoid these common mistakes that sabotage the chances of approval.

Double-check all the information on your application before submitting. Errors and inconsistencies raise red flags. Submit an accurate and complete application.
Trying to use a general merchant account as a low-risk business violates the processor’s terms and can shut down your business.
Missing legal pages and a poorly designed website lead to instant rejection of the application. Do not neglect the compliance requirements of your industry.
If you have experienced account closures due to chargebacks, disclose them proactively and take steps to address such issues. Failing to maintain a processing history also leads to scrutiny and rejection.

Final Thoughts

A successful application is the result of preparation and transparency. A reputable partner also improves your chances of approval by offering features for secure transactions and compliance. Take time to research the requirements, collect documents, and submit the application diligently.

Rejection is a normal part of the process. It gives you a chance to improve your business operations and reapply with improved performance, ultimately improving customer satisfaction and revenue.

Once your account is approved, maintain a strong relationship with the payment processors and stay compliant with industry requirements for the success and growth of your business.

This post may contain affiliate links. Financial Panther has partnered with AwardWallet and CardRatings for our coverage of credit card products. Financial Panther, AwardWallet, and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. The site does not include all card companies, or all available card offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.

Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.

Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:

SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
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M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
Empower. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.

Feel free to send Kevin a message here.