Do Stripe or Square Offer High Risk Merchant Accounts?

Starting up a new business is an exciting time, but it requires a lot of planning. One of the things you’ll need to get sorted before the grand opening is your merchant account. Without one, you won’t be able to accept card payments from customers.
Christopher Harvey
6 min read

Starting up a new business is an exciting time, but it requires a lot of planning. One of the things you’ll need to get sorted before the grand opening is your merchant account. Without one, you won’t be able to accept card payments from customers.

But, while necessary, it’s not always that simple to open up a new merchant account. Although some merchant processors support businesses of all types, many do not. If your business is considered high risk, you might struggle to open an account with some of the better-known payment processors.

Here’s all you need to know about high-risk merchant accounts and whether processors like Stripe and Square support them.

What Is a High-Risk Merchant Account?

Merchant accounts are bank accounts that payment processors provide. Unless a business  opens a merchant account they are unable to accept credit and debit card transactions. Both brick-and-mortar and online eCommerce businesses need merchant accounts.

A high risk merchant account performs the same function as any other account. The most notable difference is that there are higher rates and fees attached to high-risk accounts. They are generally the only options available to businesses that are prone to friendly fraud. Merchants with bad credit may also only have access to high-risk accounts.

The increased fees act as a sort of financial cushion for payment processors. So, if a merchant is a frequent victim of friendly fraud, the processor already has extra money from the merchant to compensate for any losses. Businesses in the gambling, cryptocurrency, and nutraceutical industries are all likely to be considered high-risk.

Do Stripe and Square Offer High-Risk Merchant Accounts?

There are plenty of merchant account providers out there, and Stripe and Square are among the biggest. When you open a high risk merchant account with either of them, you can benefit from fast approval. However, they are far from the best merchant accounts for high risk business owners.

You see, Stripe and Square do not support high-risk businesses. Even with a safety net both providers are unwilling to face the threat of financial loss. If you work in High Risk Industries or want to own your account, you’re better off looking elsewhere.

What Do Stripe and Square Deem as High-Risk?

Even though different providers have different definitions of the term “high risk”, there are some general rules of thumb. For starters, if your business operates in a sector that faces high levels of fraud or disputes, it is high-risk. Additionally, businesses that provide services, sell products in advance, or offer refunds are considered high-risk.

Both Stripe and Square have black and white levels of risk based on multiple factors. If your business is approved initially, at about 3-4 weeks the do a full risk evaluation. As such, you might find that you end up branded with the high-risk label without warning. If that happens your account will be locked with all funds. This is terrible and is often the ruin of small businesses.

What Happens If Stripe and Square Decide You’re a High-Risk Merchant?

Usually, Stripe or Square will let you know straight away whether your application for a merchant account has been approved. But, if you’re denied, you’ll need to look for payment processors that offer high-risk merchant accounts as standard.

As mentioned above, even if you’re approved, your account might later be shut down without warning. In other words, when your processor recategorizes your company as high-risk, it will suddenly stop you from processing payments. As a result, you might unexpectedly end up without a major income stream and no access to your existing funds.

Where to Open a High Risk eCommerce Merchant Account

To avoid falling victim to changeable payment processors, open a high-risk merchant account in the beginning. Far from, the next best thing, there are many benefits when opening a proper high-risk merchant account.

For example, your business can offer recurring payments and sell a wider variety of products and services. You can also cater to international markets, whereas you can’t with most standard merchant accounts. And, it’s easier to get approved for a high-risk merchant account. So, it offers both long and short-term advantages.

The Best Merchant Account for High Risk Businesses

Just because your business is high risk doesn’t mean it can’t thrive. With a high-risk merchant account from Cathedral Payments, you’ll enjoy plenty of perks that standard merchant accounts can’t offer. Plus, you won’t have to worry about your account coming down without notice. Our accounts cater to businesses of all types and help them achieve consistent revenue and growth.

Reach out to an account Specialist today!

Get a free rate quote. No commitment required.
Get started now
Lightning fast underwriting
Most competitive fees
All payment solutions