Don’t want chargebacks and payment disputes bleeding your business dry?
Every merchant that accepts card payments faces some form of merchant account risk. The problem is magnified for high-risk merchants.
Chargebacks alone can cause:
- Loss of revenue
- Increased processing fees
- Account termination
The issue?
Most business owners don’t learn about merchant account risk until it’s too late. By the time you realize how costly chargebacks can be, you’ve likely already incurred thousands of dollars in unnecessary fees. Having a chargeback prevention strategy isn’t optional if you’re a high-risk merchant… It’s required to survive.
If you don’t have a risk management strategy your merchant account is at risk.
Fortunately, educating yourself on risk management and taking steps to prevent chargebacks can save your business thousands. In this guide, we cover everything modern business owners need to know about merchant account risk.
Ready to learn how to protect your business?
You’ll learn:
- What Is Merchant Account Risk?
- Why Chargebacks Are Your Number 1 Risk
- Top 5x High-Risk Payment Processors
- Reduce Merchant Account Risk
What Is Merchant Account Risk?
Merchant account risk is the potential monetary loss your business could face when accepting card payments.
Payment processors/banks measure this risk based on your industry, chargeback ratio, revenue, etc. If you work in a high-risk industry or have been flagged by the card brands, finding reliable high-risk business payment solutions can be difficult. Chargeback prevention tools and services become even more important.
However…
Risk varies drastically by industry. Certain businesses are deemed high-risk by default based on the type of service they provide. High-risk industries include travel, supplements, CBD, gaming, and subscriptions.
Here are some of the most common reasons why a business is deemed high-risk:
- High-risk industry
- Predominantly processing CNP transactions
- High-ticket items or subscriptions
- High chargeback ratio
Understanding where your business falls in terms of risk helps you take proactive measures to protect your bottom line.
Why Chargebacks Are Your Biggest Risk
Chargebacks are your number 1 risk when accepting card payments.
A chargeback occurs any time a customer files a dispute with their bank. When a chargeback is issued, you no longer get paid for that transaction. You are also charged a fee by your processor. After a certain amount of chargebacks, your account can be placed on review or terminated entirely.
But did you know…
Chargebacks are becoming more and more expensive. In Mastercard’s latest chargeback report, chargeback losses worldwide are expected to rise from $33.79 billion in 2025 to $41.69 billion in 2028. That is nearly a 23% increase in three years.
….and it doesn’t stop there.
The scary part? Most chargebacks are not actual fraud. Friendly fraud, which occurs when customers dispute legitimate transactions is now the most common form of fraud worldwide. Research from the card networks shows up to 70% of card fraud stems from chargebacks.
This means that honest businesses are losing money to fraud because many customers find it easier to file a chargeback than request a refund from a merchant.
That is scary when you think about it.
Chargebacks are a part of doing business as a high-risk merchant. As long as your ratios stay below what Visa and Mastercard determine is too high you should be ok. But if your ratios get too high your merchant account could be placed into a program…kicked out of everywhere.
Top 5x High Risk Payment Processors
Not all payment processors are created equal. This is especially true for high-risk businesses.
As mentioned earlier if you work in a market that is deemed high-risk you need to partner with a payment processor that understands your business.
Here are 5 of the best high-risk payment processors today:
1. 2Accept
2Accept is the number one recommended payment processor for high-risk merchants. They focus solely on high-risk businesses and have custom solutions with powerful chargeback prevention built into their platform. 2Accept offers quick approvals (usually the same day) and has a team that knows how challenging running a high-risk business can be.
2. PaymentCloud
PaymentCloud offers services to many high-risk industries with customized pricing based on your volume. They also assign a dedicated account manager to every one of their clients.
3. Durango Merchant Services
Durango specializes in hard-to-place businesses. They have domestic and international bank relationships and have been in business for over 25 years.
4. PayKings
PayKings has one of the quickest approvals (up to 24 hours). They service over 50 high-risk industries and have an automated underwriting process.
5. Seamless Chex
Seamless Chex offers flat rate pricing, instant onboarding, and dedicated account managers.
Long story short, if you consider yourself a high-risk business you should work with a payment processor who treats you that way. Partnering with big name brands who focus on average risk merchants will end with frozen funds and terminated accounts.
How To Reduce Merchant Account Risk
Ok, now we get into the most crucial part…. Ways to prevent chargebacks.
Luckily, there are some pretty clear-cut strategies any high-risk merchant can implement to reduce risk. These are straightforward but require some discipline.
Have clear billing descriptors. If the name of your business doesn’t clearly show up on your customer’s bank statement disputes are inevitable. One of the top reasons for “friendly fraud” is customers not recognizing the name of your business.
Use fraud detection tools. AVS, CVV, and 3D Secure are 3 fraud prevention tools that every merchant should utilize. Address verification (AVS), CVV checks, and 3D Secure adds an additional layer of security to each transaction. Almost every high-risk processor has these features built into their platforms.
Easy refund policy. Don’t make it difficult for customers to request refunds. Be straight forward with your refund policy and provide customers with an easy way to request one. When its easy for customers to request refunds they will be less inclined to file a chargeback with their bank.
Watch your chargeback ratio. Chargeback ratios should always be under 1%. Set up your merchant dashboard to alert you when chargebacks are submitted. High-risk or not you should always stay on top of your disputes.
Quickly dispute any challenges. Time is of the essence when a customer files a challenge. Provide your customers with as much information about the transaction as possible. Speed is critical when it comes to dispute resolution.
Wrapping Up
Merchant account risk is a scary topic but it’s one that all business owners should understand. As chargebacks continue to rise each year leaving your business vulnerable isn’t wise.
Remember:
- Know what risk tier your business falls into
- Work with a high-risk focused payment processor like 2Accept
- Have a chargeback prevention strategy
- Stay on top of your chargebacks and resolve disputes quickly
- Have clear billing descriptors
- Have an easy refund policy
Taking these actions can prevent you from losing thousands on unnecessary fees. They can also keep your merchant account in good standing and allow you to continue processing payments without any interruptions.
It’s common for businesses to become complacent about risk until it’s too late. Don’t wait until your merchant account gets placed on review to take action. Start building a robust chargeback prevention strategy today.
