A Complete Guide to High-Risk Merchant Account Fees & Rates in 2024

High Risk Merchant Account Fees

Running a business in a high-risk industry is…complicated. Trust us, we know, and so do the hundreds of high-risk businesses we’ve helped over the years.

One of the most common stressors, obstacles, and headaches? Understanding your high-risk merchant account fees.

Add that to the long list of other things you have to do, like finding a great merchant account provider (specifically a high-risk one) and maintaining it in good health, all while trying to grow your business, and you’re not left with much time to really understand those fees.

So, to save you some time, we’ve broken down the average payment service fees to help you organize your finances and get a better understanding of why the fees might vary for businesses in high-risk industries.

Why Are Processing Costs Different for High-Risk Merchant Accounts?

High-risk merchant accounts typically come with higher fees than standard merchant accounts. It’s annoying, but it’s a fact you can’t get around as a high-risk business owner.

That’s because businesses in high-risk sectors face higher risks, obviously, which are reflected in the price they’re charged to manage the account.

Higher prices are processors’ way of protecting themselves from excessive financial losses.

So, basically, businesses that face higher chances of risks have to pay more to manage them. That makes sense, right? Yes, but why are the fees for your gambling site much higher than the fees your friend pays for their merchant account for their high-risk eCommerce site? 

Well, that’s because, despite being categorized as high-risk in the general sense, each business model is different, and each industry has its own risks or the extent of these inherent risks. Thus, the fees may vary.

💡 Are you just starting to build your high-risk business? Avoid common mistakes by reading through our guide, 7 (Expert) Things to Know About Starting a High-Risk Business.

Four Merchant Fees That Change According to Your Risk Level

Not all processing fees vary. However, the four below usually do, depending on the industry, the subsequent chargeback rates, transaction volumes, and your overall risk level. 

Chargeback Fees

Many high-risk industries, if not all, are associated with higher chargeback rates. This is one of the biggest reasons a high-risk merchant would need a dedicated merchant account in the first place and why you should always expect that your fees for that kind of account will be higher.

Transaction Rates

High-risk transactions are more susceptible to fraud due to the high ticket sizes. So, the processor would need to implement extra measures to prevent these risks, which means that the transaction rates will likely be higher than average, too.

Monthly Fees

Monthly fees may be higher for high-risk merchants because the approach processors need to take to maintain a healthy account and manage the risks requires more knowledge, extra tools, and often more support and guidance as well. Hence, the service (especially if it’s a high-quality service) will come at a cost.

The monthly fee for merchant account services is usually the same for everybody, but you might experience varying other fees depending on your company's risk level, volume transactions, etc.

Dennis Pedersen PayFasto

Reserve Accounts

These are funds that are collected by the payment service provider to have an emergency fund when working with high-risk businesses. The higher the risk, the bigger the reserves. Think of it as collateral in case something goes wrong.

Three Merchant Fees Your Risk Level Doesn’t Affect

Regardless of your business’s risk level, certain fees remain the same for most high-risk businesses and may only vary depending on the provider you work with. Those include…

Refund Fees

Refund fees are typically the same for establishments across all high-risk trades, as it is a fee for one of the most commonly needed services

PCI Compliance Fees

This fee is required to ensure a business meets the PCI DSS (Payment Card Industry Data Security Standard), which is typically a flat fee and is the same for all industries.

Security Fees

These fees are generally fixed. However, there will be added costs if you want extra security measures, such as fraud screening or chargeback alerts.

A scammer guy in front of a laptop smiling as he just took money from an account. Show some credit cards in the air around him

Other High-Risk Merchant Account Fees to Consider

Aside from the basics listed above, there are some other fees to consider before settling on a processor.

While these might seem like minor costs, they can have a huge impact on your business’s long-term profitability.

Interchange Plus Pricing 

The IC++ pricing consists of two parts—the card schemes cut combined with the markup set by the processor.

These are usually very small per-transaction percentage fees that ultimately add up to a large sum. So, it’s important to compare the rates offered by different payment service providers. 

Tiered Pricing

Many high-risk processors offer their services in a tiered pricing format.

This means that the pricing is built up in levels, and each time you hit the “cap,” the processing fees will be lowered.

Again, this is another fee that might not seem like much, but it can make a big difference in your revenue in the long run.

Monthly Minimums

Monthly minimums are “goals” established by your processor based on your transaction history or cash flow forecasts.

For example, if you’ve shown that your business is able to process 300k monthly, the monthly minimum will likely be set at 200k, and if your monthly volumes don’t hit that mark, you’ll have to cover the difference. 

This is one of the bigger costs that can make a difference in the success of your business, especially if you’re in a high-risk industry that experiences seasonal fluctuations in demand or revenue.

Account Termination

The termination fee is a simple flat fee determined by your service provider. It’s charged if a merchant closes their account before the agreed-upon term ends. 

Unfortunately, we can’t give you an average on this one, as the fee is set by the processor you work with.

Dormancy Fee

This fee must be paid after a period of inactivity on the merchant’s side.

If you haven’t been able to process any transactions during a set period of time, you’ll have to pay the processor a predetermined sum to cover the services and tools that were likely still running in the background to keep your account open.

Some money in the air looks like savings around a credit card

How Does a Processor Determine High-Risk Merchant Fees?

Payment processors usually determine the prices for their services based on various factors, so there is no one-size-fits-all guide to follow here (sorry).

That applies to high-risk merchants just as much as it does to processors (we have to review applications on a case-by-case basis, for example, and consider various factors before agreeing to fair terms and fees).

However, the following elements are what we at PayFasto take into account when putting together pricing proposals for our merchants:

  • Transaction history

  • Monthly volumes

  • Chargebacks and refunds

  • Business model

  • The overall risk level of your industry

  • Overall stability

  • Closer assessment of your business’s needs 

All High-Risk Merchant Account Fees

In reality, there is no ‘average fee’ for merchant account fees, as the price ultimately depends on your business’s specific needs, classifications, or actual payment processor.

Regardless of the industry you’re in, your business model, or your processor, the fees that are typically required for a high-risk merchant account include:

  • MDR: Percentage fee per transaction that’s deducted immediately from the funds prior to being released to your main bank account, IC++ (interchange), which means that the card scheme and card issuing bank take their cut

  • Authorization fee: Acquiring fee per transaction to either approve or decline a payment

  • Refund fee: Fee per refund that’s initiated from the merchant side to reimburse a purchase

  • Chargeback fee: Fee caused by a chargeback that has gone through, as a chargeback can be prevented

  • Rolling reserve: “Involuntary” savings that are collected over time to cover unexpected costs in case of collateral damage like bankruptcy, etc.

  • Transaction fee: Fee per transaction on the high-risk gateways side, which occurs on approved and declined transactions

  • 3DS fee: Fee to activate the use of 3DS on transactions, which is mandatory in EU

  • Set up fee: Start-up fee charged before the solution provider takes on a deal if it’s deemed riskier than average OR a setup fee which will be charged after getting your merchant account approved by the acquiring bank

  • Monthly fee: Recurring fee for the high-risk gateway services, including activation, monitoring, and maintenance

  • Dormancy fee: Fee charged after three months of inactivity on the merchant’s side

Get a Quote for High-Risk Merchant Services

While it is important to look at the included fees and really understand each cost so you won’t incur unnecessary charges, this isn’t something you should base your entire decision on when picking the right merchant account provider for your high-risk business.

Aside from pricing, you should look at the processor’s experience and track record to gain insight into what they can offer your business that other similar merchant service providers can’t. 

We also suggest you look at the support they offer, security measures available, and other tools that can aid your business’s success.

If you’re looking for a provider that ticks all those boxes (and more), consider PayFasto, a merchant account, and payment gateway provider who understands the needs of your high-risk business.

Get a free, no-obligation quote for a high-risk merchant account and payment gateway here. We’ll review your business information and get back to you ASAP.

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