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How Do High And Low Risk Merchant Accounts Differ From Each Other?

OW DO HIGH AND LOW RISK MERCHANT ACCOUNTS DIFFER FROM EACH OTHER?Businesses use merchant accounts to accept credit and debit card payments. You'll need a merchant account from a bank or an independent Payment Service Provider if you wish to take card payments (PSP). They allow you to accept card-present transactions at a point of sale (POS) terminal and card, not present (CNP) transactions online or over the phone.

These types of cards fall under the high risk card processing merchant account. A high-risk merchant account is one for a company that focuses on a high risk of chargebacks. The banks underwrite these accounts, and people use increased fees to help balance the risk. Low-risk merchants are more likely to be able to negotiate a lower price and a range of account offerings.

What is a high-risk merchant account?

If a payment processor determines that your business account is at a higher risk for chargebacks, fraud, or high returns, they will classify it as a high-risk merchant account. It could be due to several factors, including that you are a new merchant that has never processed payments before or that your industry is considered high risk and has a high probability of fraud (e.g., controversial products). High-risk merchant accounts pay higher processing fees to compensate for this fee. Although each credit card processing platform is different, high-risk merchant accounts will all have a higher wage. Also, the entire transaction processing fees will often go more than double those of low-risk merchant accounts.

What is a low-risk merchant account?

Low-risk merchant accounts often have a low transaction volume (less than $20,000 per month), a transaction sale average of less than $500, and work in an industry with a low rate of chargebacks, fraud, or returns. Low-risk retailers pay lower processing costs to their payment processors than high-risk merchants. Retail establishments, pet supplies, online fashion stores, parking garages, book stores, and auto parts stores are low-risk merchant accounts. A low-risk merchant account has a low probability of costing the bank money or inviting widespread fraud. As a result, the payment processor views it as a wise, or at the very least, secure financial investment.

Difference between the low and high-risk merchant account

The merchant accounts with low and high risks get classified in different forms. Let us see the difference between both accounts.

High-risk merchant account

Low-risk merchant account

If a payment processor determines that your business account is at a higher risk for chargebacks, fraud, or high returns, they will classify it as high-risk.

A low-risk merchant account typically contains the following characteristics: There is only one sort of currency that they accept.

More than $20,000 in monthly expenses.

Less than $20,000 in monthly expenses.

Average transactions for a credit card are higher than $500.

The average transaction for a credit card is lower than $500

These accounts generally have excessive chargebacks and weak credit history.

These accounts have a zero to low chargebacks ratio and good credit history.

How to open the merchant account?

You'll need to register a merchant account if you want to start accepting credit card payments from your clients. While the process may appear daunting at first, it is very manageable. Follow the below steps to open a merchant account.

  • Obtain a business permit.
  • Open a bank account for your business.
  • Consider your requirements.
  • Compare and contrast service suppliers.
  • Fill out an application.
  • Apply to underwrite
  • Obtain approval and begin processing.

Benefits of the merchant account

HOW DO HIGH AND LOW RISK MERCHANT ACCOUNTS DIFFER FROM EACH OTHER?Cash and cheques are getting less and less popular among your clients, while online transactions and debit card payments are decreasing. A merchant account, or one that allows the holder to collect payment in different methods (usually debit or credit cards), can help your firm take advantage of these opportunities and add value in different ways.

  • Credit Cards are accepted.

One of the most crucial features of a merchant account is the ability to accept credit and debit cards. Customers continue to choose credit and debit cards are the new 'standard.' Businesses place a premium on the customer experience. Typically discover that removing any friction from the purchasing or payment acceptance processes can help them attract new customers and boost cash flow.

  • Boost Your Sales

Customers spend more when given the option of using credit cards rather than cash, according to several studies and research conducted over the years. Indeed, according to a Community Merchants USA study, 83 percent of small companies that accept credit cards witnessed an increase in sales in one poll sponsored by Intuit.  This increase could affect your company's sales and overall growth.

  • Improved Financial Management

Accepting credit cards and transitioning to online payments streamlines the transaction procedure for your company. Rather than counting cash, electronic payments will help you keep organized and improve cash flow management and forecasting.

  • Avoid Bad Checks

By using merchant account services and accepting electronic payments, your business can avoid the inconvenience and costs of bounced checks. Furthermore, combined with a comprehensive payment system, your merchant account can enable you to take recurring payments for services you provide daily (classes, landscaping, cleaning, etc.)

  • Convenience for Customers

Simply allowing customers to make purchases in multiple ways and a merchant account can lead to satisfied (and repeat) customers. Your consumers will enjoy their shopping experience with you when they can shop how and when they want. It's with credit or debit cards, online payments through a payment processor, or a combination of the two. We are providing you cover with a shopping cart for your services, mobile payments, and regular billing.


Merchant accounts are also known as business accounts. These accounts allow payment from different platforms in one go. Also, we have gone through the two different types of merchant accounts with low and high-risk merchant accounts. Based on the use, people have the choice to open an account. High-risk merchant accounts consist of many transactions and different payment gateways; on the other hand, low-risk merchant accounts consist of limited transactions. It accepts only one type of payment gateway, and the charges are also low in these accounts.


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