What Are High-Risk Merchant Account Fees in 2024?

Your high-risk business will likely spend more money on merchant account fees than if it wasn’t at such a risk. You’ll spend these higher costs if your business is in a high-risk field or if you have a poor credit rating and are subject to plenty of chargebacks and fraud issues.

These account fees are for a merchant account provider processing transactions. The dues include charges for handling payments, setting up accounts, and capturing card data.

The specific fees you’ll spend will vary by account provider and your industry. But you can expect to pay more for them than you might expect.

What Types of Fees Are There?

You’ll have to pay various types of fees when dealing with a high-risk merchant account:

  • Processing Fees: All merchant accounts will have processing fees where you will spend a specific total to manage a card transaction. The fee goes alongside whatever interchange rate a credit card network will spend. A processor will charge these fees to offset the cost of moving payments through the interchange. The fee is a flat rate that works for all transactions, although the specific rate will vary over your industry.

High-risk businesses will spend more on processing fees, although the difference can vary. It could be a few tenths of a percentage point higher than what a low-risk business spends.

  • Setup Fees: A setup fee will work towards setting up your account. The effort includes ensuring your website or business is compatible with whatever system your processor uses. A high-risk merchant will pay more for setup fees on average.
  • Capture Fee: A capture fee goes towards capturing credit card data from your customers. The capture fee works if you require a terminal that accepts payments. The terminal can include a physical POS system or a shopping cart terminal for ecommerce purposes. You could spend at least $50 on a physical or online gateway, although some gateways can go for hundreds of dollars. Not all providers will have terminals for work in this case.

Some high-risk service providers will have limits on how many cards you can capture. They may allow you to process transactions beyond your limit, but you’d be subject to an additional fee for each sale.

  • Chargeback Fees: A chargeback fee is issued whenever your business experiences a chargeback. The processor will have to reverse the transaction you completed, causing you to lose money in the effort. You will also be charged a fee for each chargeback. The fee can be at least $20 in some situations.
  • Termination Fee: You may be subject to a contract for service. You will pay a termination fee if you get out of that contract before it ends. High-risk businesses often enter longer contracts, although some providers may offer contract-free deals where you pay for services by the month.

Your provider may include additional charges and fees. Check the contract for details to see what is working. Be sure the contract is also of a suitable length that you’re comfortable with supporting. It should be something that doesn’t force you into a relationship with a provider that you might not be comfortable supporting after a while.

What Will You Spend?

The amount you will spend on high-risk merchant account fees will vary by each provider. But your business situation will also play a role in how much you’re going to spend on the service.

Some of the points that will influence what you will spend on your high-risk merchant account include:

  • Your current credit score
  • Your chargeback ratio
  • How well you have been working with other processors if applicable
  • Your industry and its regulation; unregulated industries or ones with ambiguous legal concerns may be at higher risk
  • How you’re managing your payments; you could spend more if you use a recurring billing method that may be prone to errors or duplicate entries

A service provider will charge more if it determines you’re at a greater risk of trouble. A provider can offer a free quote to help you see what you can qualify for and if you are eligible for those terms.

How Can You Keep Your Cost Down?

You can keep yourself from spending more money on high-risk merchant account fees if you follow a few plans:

  • Create a positive relationship with all your customers. Let them know about everything you’re offering and that they understand what you are providing. People will be more aware of what you’re offering and will be less likely to file for chargebacks.
  • Be descriptive and direct when talking about your products or services. This point is especially critical if you’re running an online retail site where people cannot physically see what you are selling.
  • Plan your budget accordingly. You’ll be subject to a rolling reserve when getting a high-risk account ready.
  • Check on the legal nature of your business. You may reduce your risk if you get out of industries or services that are subject to heavy regulation or may be illegal in certain places.
  • See if your current POS infrastructure works with whatever setup a merchant account provider supports. You could keep your costs down if a provider can work with your existing materials instead of forcing you to buy something new. Using your current materials is especially more effective than having to lease equipment, as leases can be more expensive and won’t always guarantee you can keep your equipment.
  • Watch for how a contract works. Some long-term contracts may charge higher fees. They charge higher totals in exchange for the added commitment someone will make with you. A by-the-month service may be more useful, especially if it doesn’t impose as many fees or charges as you may expect.

The high-risk merchant account fees you will spend can be substantial. Take note of what you will pay and that you’re going to find something sensible for your needs. The work should be about giving your high-risk business access to the processing support it needs without spending more than you can afford.

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