Bankers don’t like to gamble. They tend to shy away from doing business with anything labeled high risk. This is true for credit card and debit card processing. Once your business is labeled high risk, you’ll have trouble finding a bank or payment processor that will do business with you. Fortunately, having trouble is not the same as not able to. Some payment processors specialize in helping high risk businesses. They’re called high risk processors or high risk merchant account providers. We profile five great ones in this article.
High risk processors work in a slightly different way than low risk processors. So, let’s first go over what you can expect when working with a high risk processor.
- A High Risk Processor Helps You Find an Acquiring Bank
- High Risk Processors Don’t Publish Pricing on Their Website
- Services High Risk Processors Usually Provide
- Documents You’ll Need to Apply for a High Risk Merchant Account
- Questions to Ask a High Risk Processor Before Signing Up
- Payment Cloud Offers Several Payment Gateways for Online Processing
- Payline Data Offers Both Low Risk and High Risk Merchant Accounts
- Host Merchant Services Pays Lots of Attention to Customer Service
- Durango Merchant Services is Primarily a High Risk Merchant Account Provider
- Soar Payments is an Up and Comer High Risk Processor
- Are There Other Great High Risk Processors?
A High Risk Processor Helps You Find an Acquiring Bank
Not every high risk processor can help every high risk business. Each high risk processor has a direct relationship with one or more acquiring banks. Based on this relationship, they can usually convince some—but not all—acquiring banks to do business with you. Often, the yes or no depends on your business’s industry, credit rating, time in business, and other factors.
So, even if one high risk processor declines to do business with you, try a few others to see what they say.
High Risk Processors Don’t Publish Pricing on Their Website
Because high risk processors usually work with several acquiring banks to get you the best deal, they won’t know what rates they can get for you until they have your business and financial information. Once they have the information, they can shop for rates from one or more acquiring banks. This is why they can’t publish high risk rates on their website. They simply don’t know what it might be.
Note, though, that just because they don’t disclose a rate doesn’t mean that the rates will be very high. It is true that high risk rates tend to be higher than low risk rates. But you won’t know how much higher until you ask.
High risk processors also often do not disclose the cost of payment processing hardware and software. We don’t see any reason for this, except that it seems to be standard practice. To make sure you’re not overpaying, check the website of some of the low risk processors we profiled in another article. Low risk processors tend to show how much they charge for equipment. This way, you’ll have an idea of how much the equipment and software typically costs.
It usually takes 1-5 days to set up a high risk processing account. Some processors will ask for a setup or application fee. This fee isn’t unusual, but not all high risk processors ask for it.
Services High Risk Processors Usually Provide
A high risk processor usually spends more time with a merchant setting up and maintaining payment processing accounts. A typical high risk processor can often help you with the following.
You Often Get a Dedicated Account Representative
Because a high risk merchant account usually requires more attention, high risk processors often assign a specific account representative to work with you for as long as you do business with them. You can call this representative any time you have questions about your account.
A High Risk Processor Can Help You Set Up ACH or eCheck Processing
Sometimes, even with a high risk processor’s relationship with many banks, they won’t be able to find an acquiring bank that will do business with you. Even then, a high risk processor can still help you take electronic payments. They’ll help you set up an ACH and/or eCheck merchant account. ACH and eCheck payments are less prone to chargeback disputes, so it’s easier to get banks to work with you.
Once you build up a good credit record using your ACH or eCheck merchant account, your high risk processor can help you try again setting up a credit and debit card merchant account. Often, the rehabilitation takes 3-6 months of steady processing with a low chargeback rate. (Unless you’re on the MATCH list. Then, you won’t be able to process credit and debit cards until you age off the list.)
Some High Risk Processors Can Help You Set Up Load Balancing
In addition to ACH/eCheck processing, some high risk processors can help you set up something called load balancing. Load balancing is typically used to maintain a low chargeback rate.
To perform load balancing, you’ll first need to set up several high risk merchant accounts. If one of your merchant accounts starts to build a high chargeback percentage, you then switch to a second high risk merchant account.
This second merchant account will have a lower chargeback rate. Now, you can keep taking payments without worrying about getting close to your chargeback threshold. When the chargeback rate of your second account gets dangerously high, you can switch to a third high risk merchant account or, if some time has passed, switch back to your first merchant account.
Documents You’ll Need to Apply for a High Risk Merchant Account
You’ll typically need to show the high risk processor quite a few documents when you apply for your high risk merchant account. These documents typically include:
- Proof of business (e.g. d/b/a registration, articles of incorporation, articles of organization, and/or business license)
- A voided business check
- Your driver’s license, passport, or government issued ID
- Bank statements for 3 months (if this is a new business, you might need to show 3 months of your personal bank statements)
- Credit card processing statement with your previous processor, if applicable
Questions to Ask a High Risk Processor Before Signing Up
We recommend you talk to a few processors before deciding on the one to work with. Here are some questions you might want to ask them to help you decide.
Pricing
What is the pricing model and what are the specific rates they’re offering you. See our guide for a quick summary of the most common pricing models.
How much will the equipment and software cost.
Reserve Account
You’ll almost certainly need a reserve account. Ask how the account is funded. There are typically two funding methods: rolling or capped.
With a rolling account, you put a percentage of your processing fees into the account. If the money is used to take care of chargeback disputes, then you don’t get it back. But if, for example, after 6 months and the money is not used, then the account releases the money to you.
With a capped account, you put money in the reserve until it reaches an upper threshold. You keep all your processing fees until the reserve falls to a lower threshold. Then, you replenish the reserve until it reaches the upper threshold again.
Usually, a reserve account holds 5%-10% of your processing revenue. The exact percentage is often negotiable.
Chargebacks and Refunds
You’ll want to know what are the chargeback fees and whether you get the fee back if you win the dispute. You should also ask about whether there are any fees if you issue a refund and if you get any of the original processing fees back.
Ask what are the chargeback and refund thresholds before you’re penalized. The threshold is usually 2%. Be sure to verify this with the processor.
Contract Renewal and Termination
You’ll usually have to sign a multi-year contract with the processor. Ask how long the contract will be for. Usually, the length is 3-5 years. Get this in writing.
Ask about contract termination procedures. A contract can terminate early or terminate at the end of the contracting period. Be sure to ask for procedures for both types. Some contracts will automatically renew if you don’t tell the processor early that you do not wish to renew. You’ll need to understand this procedure. Get everything in writing.
Risk Mitigation
Ask if there’s anything the processor is doing to maintain or lower the risk of credit card fraud. There are many software that can help detect fraud. Some processors offer some software features for free but charge for others.
And now, we present our pick for five great high risk processors. The profiles appear in no order of preference.
Payment Cloud Offers Several Payment Gateways for Online Processing
Payment Cloud offers payment processing services to both low and high risk merchants. For high risk processing, Payment Cloud has relationship with 20+ banks, so they can shop for rates. They also offer several pricing models for high risk processing, and they can help you decide which model is best for your business.
Payment Cloud assigns a dedicated account representative to every new client. If issues come up in the future, you can reach out to your account representative for help. The account representative not only helps you find an acquiring bank, they will also help you decide your hardware and software equipment needs, set up the equipment, and deal with chargebacks.
Payment Cloud offers lots of payment processing hardware and software. Unfortunately, they do not show pricing on their website. They do show three payment gateways: Authorize.net, Network Merchants Inc. (NMI), and USAePay. NMI has a load balancing feature, if you need the service.
Payment Cloud offers ACH and eCheck processing, if you wish to use these.
We checked the Better Business Bureau (BBB) for complaints against Payment Cloud. They had two complaints in the last 12 months. Payment Cloud responded to both complaints. This gives them an A- rating.
Payline Data Offers Both Low Risk and High Risk Merchant Accounts
Payline Data can offer its clients both low risk processing and high risk processing. For low risk processing, they offer a combination subscription and interchange plus pricing model. However, they’re not clear on the pricing model they offer to their high risk clients.
Payline Data has relationships with 20+ banks, so they can help you shop around for the right acquiring bank. They also offer ACH processing, so you can still take payments electronically in case they can’t find a bank for you.
As for payment processing hardware and software, Payline Data has quite a few payment terminals, POS systems, virtual terminals, and payment gateways. Unfortunately, there’s no pricing on any of them. For payment terminals, Payline Data can connect you to Authorize.net or NMI (the gateway with load balancing).
Payline Data has had 3 complaints on BBB in the past 3 years, but none in the past 12 months. They do respond to the complaints. Payline Data has a rating of A+.
Host Merchant Services Pays Lots of Attention to Customer Service
Like the two processors profiled above, Host Merchant Services (HMS) also provides processing services to both low risk and high risk merchants. HMS touts their customer service as one of their strong points.
For their low risk processing, HMS uses the interchange plus pricing model. However, it’s not clear if they do the same for their high risk clients. So, be sure to ask about interchange pricing if you’re interested in processing with HMS.
For their high risk processing, HMS provides the service through the direct processor Electronic Merchant Services (EMS). We reviewed the EMS website and, while they do take merchants directly, their website doesn’t say anything about working with high risk merchants. They also do not disclose pricing.
Some wording on HMS’s high risk merchant information page suggests that HMS doesn’t require a long term contract for their high risk clients. But this isn’t very clear, so if you’re interested in working with HMS, be sure to ask for a clarification. HMS is quite clear that they do not charge a cancellation fee, if you ever wish to change processors.
On processing equipment, HMS offers many types of hardware, POS systems, and payment gateways. They also have a proprietary virtual terminal named Transaction Express. There’s no pricing disclosure on any of the hardware or software.
HMS has had one complaint on their BBB page in the past 12 months. This complaint was responded to. HMS has an A+ rating.
Durango Merchant Services is Primarily a High Risk Merchant Account Provider
Durango Merchant Services is a high risk processing specialist. But, if you’re a low risk merchant and you want to work with them, they won’t turn you away either.
Like many high risk processors, Durango will assign you a dedicated account manager. They can also help you process ACH and eChecks, in case they can’t find a bank to work with you. In addition, if they can’t find a domestic US bank to work with you, they can help you set up an offshore account. Often, non-US banks are more lenient in the types of business they will work with.
Durango does have various processing hardware, but they do not disclose pricing on their website. In addition, Durango has a proprietary gateway called Durango eCommerce Gateway. Often, payment processors offer their proprietary gateway or virtual terminal for free, but it’s unclear if this is true for Durango’s gateway.
Durango will work with both US-based and non-US-based merchants.
Durango has zero BBB complaints. It has a rating of A+.
Soar Payments is an Up and Comer High Risk Processor
Soar Payments has been in business the least amount of time (6 years as of this writing) compared with the other processors in this article. This is probably why, right now, they can only do business with US-based businesses.
Soar does not charge an application or a setup fee. They do not publish their rates on their website. But you can get a quote through their website fairly quickly.
For high risk businesses, Soar can help you process Visa, Mastercard, and ATM debit cards. Only selected merchants can be approved for American Express and Discover.
If you’re an online business, before you apply, Soar requires you to have a website set up showing the goods or services you plan to provide. Their acquiring bank might need to review the website before approval. Approval typically takes 3-5 days but can take longer for some high risk industries.
To contain chargebacks, Soar can help you set up several merchant accounts for load balancing. They can also help you set up ACH and eCheck processing, to manage risk.
Soar offers a free terminal or mobile reader for its low risk merchants, but it’s not clear whether they’ll do the same for high risk businesses. They do not show a lot of equipment information on their website. For payment gateways, they offer Authorize.net, NMI, and USAePay.
You can find a lot of what Soar offers and does not offer on their FAQ page.
Soar has zero complaints on BBB and has an A+ rating.
Are There Other Great High Risk Processors?
Yes, there are other great high risk processors in addition to the ones profiled in this article. We limit our profile to five because we know small business owners are busy and may not have time to read an overly long article.
So, if you come across a high risk processor that’s not profiled here and think you might be interested in doing business with them, come back to this article. Use the questions we listed in this article to evaluate this processor.
Lastly, although third-party processors usually don’t take high risk businesses, Square does make a small exception. Square accepts CBD merchants, though the processing rate is higher than their normal rate.
Other third-party processors say that they often evaluate high risk businesses on a case-by-case basis. So, if you’re not sure where you fall under the high risk spectrum, be sure to check their prohibited business list or just ask their customer service. They might be able to take you as a customer.
High risk processors are difficult to evaluate because they usually disclose very little on their website. We spent almost two years as a freelance writer on credit card processing and reviewed lots of processors. So, if you have questions about high risk processors that’s not covered here, feel free to ask the questions on our Twitter, Facebook, LinkedIn, or Alignable accounts. We’ll do our best to answer.
Questions? Comments?
