High risk businesses may struggle to get merchant accounts. Banks and payment providers consider these businesses as risky. Providers examine each application closely to avoid scams. Many high risk merchant account applications get rejected on the first try.
These rejections can be frustrating for a business owner. Banks are careful to avoid big losses from questionable accounts. One high risk merchant can cost them thousands of dollars in chargebacks and fees. It helps to know the reasons behind a high risk account denial.
This post covers 7 common reasons behind high risk merchant accounts rejection. You will know what to do after a rejection and what checklists to prepare before applying for a high risk merchant account.
How Merchant Account Providers Review High Risk Applications
High risk merchant accounts require a deeper review than standard applications. Providers look closely at each detail to protect themselves from losses.
Every part of the business is checked, from credit history to past processing behavior. They also review documents, bank activity, and any legal issues tied to the company. This careful review helps them decide if the business is safe to approve or too risky to support.
Here is what they check in each review:
- Personal credit of owners: They check each owner’s personal credit report for low scores or past defaults.
- Business type and industry: Some industries are labeled high risk (like adult, gambling, or travel). Merchant account providers see if your business category is on their high risk list.
- Financial history: If you have processing history, they review your chargeback ratio and monthly volumes. They also examine recent bank statements for any issues.
- Documents and information: Underwriters verify that all submitted documents are complete and consistent. Any missing or conflicting information raises concerns.
- Legal and compliance issues: They search for tax liens, lawsuits, or regulatory problems tied to your business or owners.
The provider combines all these factors to determine your overall risk. They will reject an application with too many risk factors.
Most Common reasons to reject High Risk Merchant Accounts
When reviewing high risk accounts, providers focus on anything that could harm their payment network. They look for signs of stability and proper management. Missing information or weak business history can raise concerns.
Many of the rejections come from issues that are easy to overlook. Each one gives the provider insight into how secure the account may be. These reasons can help to analyze the common reasons behind rejections.
1. Poor personal credit
Your personal credit score plays an important role in approval. Merchant account providers examine each owner’s credit report. A low score or bad credit history is a major concern. It tells the provider that you might not pay bills or cover chargebacks. A merchant account works like a credit line for processing payments. The bank pays you for sales. If a customer later disputes a charge, the bank expects you to return those funds.
They trust you to cover any chargebacks or fees. Poor credit makes them doubt you will repay those debts. They will likely reject an applicant with a history of defaults, collections, or bankruptcy. Always review your personal credit before applying.
2. High risk business category
Certain industries have a bad reputation with payment processors. These industries fall under the high risk business category. Such as online gambling, adult entertainment, travel agencies, firearms dealers, and subscription services. Merchant account providers keep an internal list of banned or risky industries. They may flat-out reject applications from those categories. These businesses tend to have more chargebacks, fraud, or legal restrictions.
If your business is in a high risk category, it will face more scrutiny. You might need to apply with a specialized high risk merchant account provider. Always be honest about your industry on the application. Hiding your true business type will lead to problems. Some providers will work with your industry if you meet extra rules or fees. Others will say no right away. Know where your business stands and seek processors that accept your category.
3. High chargeback ratios
A chargeback is a payment dispute that ends with the money being returned. Too many disputes make approval harder. Providers check your chargeback ratio to understand the level of risk. Card brands like Visa and Mastercard have rules on how many chargebacks are allowed.
A chargeback ratio above about 1% is a serious red flag. It signals unhappy customers, fraud, or bad reputation. If you have an existing business, look at your chargeback history.
Always work to keep chargeback rates low. Provide good customer service and clear refund policies. If your chargeback ratio is high right now, address it before seeking a new merchant account. You may need to provide details on any past chargeback problems and show what you changed to fix them.
4. Prior account termination or MATCH status
Payment providers share information about risky merchants. A new provider will find out if you have any previous closed merchant account. A past account termination can place a business on the MATCH list. This list includes blacklisted accounts shared among banks. It tells every provider that another bank ended your account for forgery or excessive chargebacks. If you show up on this list, most providers will reject you automatically.
A MATCH listing stays on record for five years. If you owe money to the old provider, paying it is the only way to clear your name early. Otherwise, you must wait for five-year. Only a few high risk providers accept merchants on the MATCH list. They charge a higher fee for acceptance.
The safest approach is to protect past accounts and avoid landing on this list.
5. Missing or inconsistent documents
A merchant account application requires accurate documents for business validation. You will need to submit items such as your business license, articles of incorporation, bank account statements, and photo identification. Providers check your documents to confirm everything is in place. Missing files can delay the process.
Inappropriate documents or mismatched details make the underwriter doubt your business’s reputation. They might worry you are hiding something or are not organized. As a result, they may decline your application.
You can prevent this by crosschecking each document before you apply. Ensure names, addresses, and financial figures are consistent across your documents. Submit everything the provider requires, including supporting proof of your sales figures if available.
6. Incorrect volume or ticket size claims
Merchant applications ask for your expected monthly processing volume and average ticket size, which is the average sale amount. Providers look at these numbers to see if they match your business type. If the numbers seem unrealistic or out of place, it creates concern.
For example, a small shop claiming $500,000 in monthly sales with a $20 average ticket would need thousands of sales each month. This is not believable for a new business.
Overstating or understating your volume may lead to rejections. Some merchants list lower sales to avoid being seen as a high risk merchant account. But when real processing starts, the provider sees the actual amount. If the actual numbers are higher than what you wrote, it will cause problems.
Be truthful and reasonable when stating your volume and ticket size. If sales may grow due to seasons or new work, explain it. Add documents like contracts or past results. This helps the provider see that your numbers make sense.
7. Active tax or legal issues
Unpaid taxes or legal problems can cause your application to get rejected. Providers look at public records to see if the business or owners have these issues. If they see an active tax lien, it shows the business owes money to the government. The government can claim part of the business if the debt is not paid. This makes the business look risky to the provider. Open legal cases also create concern. These cases may result in fines or other penalties. Because of this, providers avoid approving merchant accounts with legal trouble.
A provider does not want to deal with legal trouble from a business. If they see any sign of illegal activity or serious compliance problems, they will reject the application.
Before applying, fix what you can. Pay any tax debts or start a payment plan. Try to settle legal issues if possible. If something cannot be fixed right away, be ready to explain it. Show how the issue will not affect your business or your ability to operate.
What to do after a rejected high risk application
Rejection is part of the process for many high risk merchants. The good news is that you can still improve your application. Here are the steps to follow after a denial:
- Understand the reason: Read the rejection notice or ask the provider for details so you know exactly why they declined your application.
- Fix the issues: Once you know the reason, work on that problem. If it was poor credit, focus on raising your credit score. If documents are missing, gather and organize them.
- Check your paperwork: Make sure all your information is correct and consistent next time. Update any outdated documents.
- Look for a suitable provider: Sometimes the issue just can be the wrong provider. Choose a merchant account provider that specializes in your business type.
- Consult a high risk specialist: It can help to talk to an expert who deals with high risk merchant accounts. They can guide you on what to do and which providers to approach.
Each rejection is a learning opportunity. Address the specific problems and try again with better preparation.
Checklist to prepare before applying for a high risk merchant account
Use this checklist to get ready for your high risk merchant account application:
- Review personal credit: Check your personal credit report and score. Resolve any unpaid debts or errors.
- Organize business documents: Gather all the documents for high risk account applications. This includes licenses, incorporation papers, bank statements, tax ID letters, and past processing statements.
- Verify all information: Ensure your business name, address, and owner details match on every document. Consistency makes your application look professional and honest.
- Estimate realistic volume: Calculate your expected monthly processing volume and average ticket size . Be ready to support these numbers with evidence if possible.
- Clear up legal issues: Settle any tax liens or court cases that you can. If something is unresolved, prepare a plan (with proof) for how you will handle it.
- Choose the right provider: Apply where you have a better chance, and do not waste effort on banks that ban your business type.
Completing these steps before you apply will boost your credibility. It shows the provider that you are organized and serious about your business.
Get help with a high risk merchant account specialist
High risk payment processing can feel complicated, especially when each provider has different rules. Many business owners struggle to understand the requirements and process. High Wire Payments can check your information, rate your risk, and lead you to providers that support your type of business.
This guidance helps you avoid delays and improve your application. With expert support, your documents stay organized, your numbers match, and the review process becomes smoother. An accurate application increases the chance of approval.
Conclusion
High risk merchant accounts need proper applications. A small error can lead to rejection. An expert’s help can help you avoid rejections. High Wire Payments is here to help. We review your information and help you create an application that can get approved.
We go through each step from documentation to past rejection reasons in order to help come up with a solution. With us your journey becomes easier and more predictable. To start your review now, call us at (805) 827-7451 for assistance. With the right preparation and support, even a high risk business can secure a reliable merchant account and keep growing.