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Whether your business falls into a certain industry category or has a high chargeback or refund ratio, it can be considered high-risk. However, most business owners don't realize they are high-risk until they start applying for a merchant account to process their monthly transactions for ACH, debit and credit cards.

According to Bankcard, chargebacks increase by 41% every two years – a threat that should be on every entrepreneur's radar. Chargebacks aren't only due to fraud; they can also occur from general cardholder claims, such as "merchandise was not as described" or "the merchandise was not received." 

Once your company is denied a merchant account from traditional banks, it can be overwhelming to navigate high-risk credit card processing and merchant account providers. Read on for basic information, along with pro tips to help you choose the right provider for your company.

A high-risk merchant account helps high-risk businesses, whether by industry or business practices, have top payment processing services.

If your business has a large number of chargebacks and refunds every month, you may be subject to a rolling reserve on your account, which can help cover transaction issues and fraud.

FYI: To get approved for a high-risk credit card processing and merchant account, you will need to have all of your business financials organized. Be prepared to provide financial statements, banking records and tax returns for review.

Before you apply for a credit card processing and merchant account, you will need to decide whether you are a low-risk merchant or a high-risk one. While merchant account providers generally categorize businesses into one or the other, several factors can differentiate the two.

Your processing history – and, more specifically, your chargebacks – can put you in the high-risk category. Merchant account providers can add their own characteristics to the list, but here are a few that will characterize your business as high-risk:

Tip: When applying for a high-risk credit card processing and merchant account, be as detailed as possible in your industry description. If you try to sugarcoat your company practices, you may receive an inaccurate rate quote.

A low-risk merchant may need to meet many requirements; however, the most important are: low revenue, few transactions, and low chargebacks and returns. These are additional characteristics of a low-risk merchant:

Here is a list of industries that require a high-risk merchant account:

Here are a few reasons why your business may be considered high-risk.

These are some benefits of a high-risk merchant account:

Here are some of the downsides of a high-risk merchant:

As you search for a high-risk merchant account, you will notice that there are several options available. It's important to do your research before choosing one, as it can impact how much time you spend monitoring transactions and the effect it can have on your future finances.

Here are a few features you should look for when choosing a high-risk credit card processor:

FYI: Many high-risk merchant account providers try to lock their clients into long-term contracts. Just because you need this service now doesn't mean you will always need a high-risk credit card processing and merchant account. Choose a company that allows you flexible contract terms, such as a month-to-month contract.

Since a high-risk merchant account tends to be stricter than a low-risk one, always read the contract provided before signing. The fine print can affect your rates, fees and penalties.