High Risk Credit Card Processors; Who They Are and How Banks Treat Them

Generally banks consider industries, both online and offline, as high risk credit card processors if they have high rates of fraud or credit card chargebacks within their customer base. Once they’ve classified a business they will then tend to treat all the businesses within this group the same with respect to rates and their eligibility for approval. Banks do this in many other parts of their business as well. They may for example lump together mortgages as single family homes, condo’s, apartments, rooming houses, mobile homes etc. In turn they will then disclose breakdowns of their business to their shareholders or other interested parties such as regulators and bond holders who will use these breakdowns to measure the riskiness of the bank.

Businesses classified as high risk credit card processors usually have to obtain a high risk merchant account to accept credit cards. These high risk merchant accounts have higher costs for accepting credit cards, sometimes quadruple normal rates. Additionally a rolling reserve may be required where a percentage of the billings are held back for a period of time. The existence of this rolling reserve makes it very important for companies to ensure the bank they are dealing with is very reputable as there has been instances where irreputable banks seize this rolling reserve simply because they can.

Industries that may be classified as high risk processors include, but are not limited to:

  • Online casinos and other gaming/ gambling agencies including sports wagering
  • Adult services and products
  • Pharmaceutical products
  • Travel services
  • Telemarketing businesses
  • E-wallet and E-cash
  • ISP and hosting services
  • Online cigarette or tobacco vending
  • Online auctions and debt services
  • Online dating services
  • Online sale of replica products
  • Lotteries
  • Automobile rental
  • Used automobile sales
  • Coin shops
  • Cell phones and beepers
  • Gun dealers
  • Online custom jewelry sale
  • Water purifiers
  • Check cashing services
  • Collection agencies
  • Downloading of software
  • Escort services
  • Massage parlors
  • Hair restoration services
  • Weight loss centers
  • Home-operated business
  • Mortgage services
  • Pawn Shops
  • Horoscope/fortune telling services
  • Insurance Products
  • Meat provisions/freezer/lockers
  • Multi-level marketing
  • Educational seminars
  • Time share sales