Breaking down High Risk Merchant Accounts fees: What you need to know before applying
This handbook dismantles typical fees, what they pay for, and assists you in making smart financial choices for your company.
1. Why High Risk Merchant Accounts Have Higher Fees
High risk merchant accounts are generally more costly than regular accounts because they pose higher risks. Payment processors and acquiring banks require higher fees to compensate for the risks of:
- Chargebacks
- Fraud
- Regulatory action
- High-volume processing inconsistencies
These risks make high risk merchants less attractive to traditional processors. To accommodate these merchants, specialized high risk providers offer customized solutions—but with added fees.
2. Key High Risk Merchant Account Fees Explained
Here are the most common charges you’ll encounter when applying for or using a high risk merchant account:
A. Setup Fees
Certain providers impose a one-time setup fee to open your account. This is usually between $100 and $500, depending on the provider and the complexity of your business model. Some drop this fee during promotional offers or for existing businesses.
B. Monthly Fees (Statement or Account Maintenance)
Most high risk merchant accounts charge a monthly maintenance fee to cover operational costs. Expect to pay between $10 and $50 per month. This fee is typically non-negotiable.
C. Transaction Fees
For each transaction processed, you’ll pay a percentage of the transaction amount plus a flat fee. These vary significantly:
- Rates: 2.9% to 6% per transaction
- Flat fee: $0.20 to $0.50 per transaction
- High risk merchants tend to be at the higher end of this scale.
D. Discount Rate
The discount rate is the rate your provider takes from each transaction. In high-risk industries, this could be 4% to 7%, much more than the 1.5% to 2.5% charged to low-risk merchants.
E. Rolling Reserve
A rolling reserve is a percentage of your sales (typically 5% to 10%) that the provider holds back for a defined period (typically 3 to 6 months) to meet any future chargebacks or disputes.
Although this is not technically a "fee," it can impact your cash flow and needs to be included in financial planning.
F. Chargeback Fees
With every dispute of a charge by a customer, you'll be charged a chargeback fee—no matter what the result. You can expect to pay $20 to $100 for each chargeback. Chargebacks in excess can result in penalties, increased fees, or account closing.
G. Early Termination Fees
If you terminate your merchant account prior to the end of the contract term, you may be charged an early termination fee between $300 and $1,000. Be sure to review your contract for cancellation provisions.
H. PCI Compliance Fees
Certain processors impose a monthly or yearly PCI compliance fee—a collection of requirements that guarantee secure card transactions. This fee is generally between $100 and $300 per year.
I. Gateway Fees
Payment gateways, which confirm and process card payments, also have their own monthly and transaction fees. These are typically:
- Monthly: $10–$30
- Per Transaction: $0.05–$0.15
If you're using a third-party gateway such as Authorize.Net, these fees can be apart from your processor.
3. Less-well-known or Overlooked Fees
Aside from the above, beware of less-well-known or not-so-obvious charges, including:
- Batch fees: Applied when your transactions are settled at day end
- Statement fees: For paper reports or statements
- Cross-border fees: For cross-border transactions
- Currency conversion fees: If you work in more than one currency
It's critical to request a complete fee schedule prior to signing any contract.
4. How to Compare and Negotiate Fees
When comparing providers, don't only look at the cheapest rates. Consider:
What's included (e.g., fraud protection, customer service)
- Fee transparency
- Reputation and reviews
- Contract terms and flexibility
- Some negotiation tips:
- Bundle services to minimize standalone charges (e.g., gateway + processing)
- Request lower rolling reserves after 3–6 months of clean processing
- Negotiate setup and early termination fees
- Get everything in writing—no verbal promises
5. Are High Fees Justified?
High risk merchant accounts are more costly, yet offer access to sound payment processing—vital for companies in restricted industries. These accounts ensure:
- Regulations compliance
- Chargeback protection tools
- Global transaction capabilities
- Security and fraud prevention
In brief, the worth is within the assistance and structure, rather than merely in accepting payments.
6. Tips to Keep Fees Manageable
Below are measures to reduce long-term expenses:
- Keep low chargeback rates
- Be open with customers to lower disputes
- Streamline your site with transparent policies and security
- Implement 3D Secure and AVS solutions
- Review statements for billing mistakes regularly
- Over time, good behavior can result in lower reserve requirements or decreased rates.
Conclusion
Understanding high risk merchant account fees is essential for managing your finances, planning for growth, and avoiding contract pitfalls. While the fees may seem high, they reflect the elevated risks that come with certain industries and business models.
- Before applying, make sure you:
- Review every fee line-by-line
- Compare multiple providers
- Negotiate where possible
- Understand contract terms
- Prioritize value and reliability
With the proper strategy, a high risk merchant accounts can be a tremendous resource—allowing you to process securely, take payments worldwide, and create a viable, compliant business.
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