High risk merchants are those businessmen who are in charge of a highly risky business enterprise or belong to the highly risky industries like adult entertainment, replica goods and pharmacy. Merchants may be categorized as high risk merchants due to their location, their poor credit history or if they indulge in the trade of illegal products and services or if they deal in high risk industries.

Since high risk merchants cannot trade through the normal trading accounts, they have to resort to special accounts which are known as high risk merchant accounts. These accounts are meant for conducting businesses which are prone to bankruptcy, fraudulent transactions, high volume of sales, high rate of refunds as well as high rate of charge backs.

The accounts opened by high risk merchants are classified under the highly risky category and are therefore not provided by most of the banks. Such accounts are opened with the third party who not only charge a higher rate in lieu of the account but also provide protection against a high level of fraud which is likely to occur in such a business.

When a high risk merchant opens a bank account, then he has to so through the third party merchant account providers who are known to charge a higher rate as compared to the general ecommerce merchant but a lower rate when compared to those provided by the banks for such enterprises. Therefore, the total expenditure incurred by high risk merchants would include application fees, transaction fees, monthly fees as well as discount rates.

Before entertaining high risk merchants for opening an account, all financial institutions generally conduct some research on the background information of such merchants. One of the main intentions behind this research is to find out the length of time for which the business has been operating. A business which has been around for a longer duration is likely to be trusted more as compared to a business which has been around for a short period of time.

All high risk merchants have a credit report which reflects on their reputation with regards to payment of credit. This is also investigated since the merchant’s capacity to repay loans as well as his vulnerability to bankruptcy is an essential factor on which the opening of such an account depends.

Although high risk merchants pay exorbitant rates for opening a bank account they enjoy the benefits of perks and payment discounts which are also a part of such an account.