If a mainstream processor has ever declined your application, frozen your account mid-business, or quoted you rates above 4% because of your industry — you're in high-risk territory. Here's how to get approved, what you'll actually pay, and how to avoid the processors who prey on businesses with limited options.
What Makes a Business "High-Risk"?
Processors use "high-risk" as a catch-all for any business with elevated chargeback likelihood, legal complexity, or reputational concern from the card networks (Visa, Mastercard). The designation is often arbitrary — and frequently used to justify higher rates even for businesses with spotless processing histories.
Common reasons a business gets labeled high-risk:
- Industry classification — Some MCC codes (merchant category codes) are flagged regardless of your individual track record
- High chargeback rates — Above 1% of transactions triggers scrutiny from card networks
- High average ticket — Transactions over $500 have higher dispute rates
- Subscription or recurring billing — Consumers forget and dispute charges
- Card-not-present (CNS) volume — Phone or online orders have higher fraud rates than in-person swipes
- New business — Under 2 years of processing history
- Bad personal credit — Below 550 FICO triggers additional scrutiny
Standard processors (Square, Stripe, PayPal) terminate accounts without warning when they flag an industry mismatch. If you're processing CBD, supplements, firearms accessories, or similar products through a general processor that hasn't explicitly approved your vertical, expect a sudden account freeze — often at the worst possible time.
Industries Classified as High-Risk in New England
🌿 CBD and Hemp Products
Legal in all New England states, federally legal under the 2018 Farm Bill, and still declined by most mainstream processors due to proximity to cannabis. Square, Stripe, and PayPal explicitly prohibit CBD processing in their terms of service. Banks and regional processors frequently follow their lead without explanation.
Typical high-risk rate: 3.5–5.5% | FeeShield/Echelon: Case-by-case approval, competitive rate available
🔫 Firearms and Firearms Accessories
Legal federally and in all New England states (with state-specific restrictions), but major processors flag firearms retailers as high-risk. Visa and Mastercard have increased scrutiny on gun retailers since 2022 with separate MCC codes. This creates processing instability even for fully licensed FFL dealers with clean histories.
Typical high-risk rate: 3.0–5.0% | FeeShield/Echelon: 95% approval rate for licensed dealers
💊 Dietary Supplements and Nutraceuticals
High chargeback rates driven by subscription model disputes make this a near-universal high-risk designation. Even brick-and-mortar supplement retailers get flagged due to industry-wide chargeback history. Products making health claims face additional scrutiny under FTC guidelines.
Typical high-risk rate: 3.5–6.0% | FeeShield/Echelon: Retail and in-person supplement sales generally approvable
🔞 Adult Entertainment
Legal in all states when compliant with 2257 regulations and state law, but virtually blacklisted by standard processors. Visa and Mastercard have implemented strict verification requirements for adult platforms. This affects physical adult retailers, not just online platforms.
Typical high-risk rate: 5.0–8.0% | FeeShield/Echelon: Physical retail assessed case-by-case
💨 Vape, Tobacco and Smoke Shops
Tobacco and vape products face increasing regulatory pressure and chargeback exposure from online age-verification disputes. Physical smoke shops in New England with in-person-only sales are typically approvable, but online vape sales face significant processing barriers.
Typical high-risk rate: 3.0–4.5% | FeeShield/Echelon: Physical retail generally approved at standard rates
🌿 Cannabis (State-Licensed)
Legal in Massachusetts, Connecticut, Rhode Island, Vermont, and Maine — but federally illegal, which means federal banks and processors cannot serve cannabis dispensaries. Most cannabis retailers operate on cash or through state-specific solutions. SAFE Banking Act legislation has been repeatedly delayed.
Processing options: Very limited. Cash discounting or state-specific alternative solutions. Contact FeeShield for current options in your state.
High-risk merchant? Get your free audit.
We've helped businesses in every high-risk vertical find compliant, fair-rate processing. Start with a no-obligation fee audit.
Get Your Free Fee AuditWhat High-Risk Processing Actually Costs
The legitimate cost of high-risk processing is higher than standard — but not as high as most merchants end up paying. The spread between what's fair and what you're typically charged is enormous, because high-risk merchants have fewer alternatives and often take the first approval they get.
| Industry | Market Rate (fair) | What Merchants Typically Pay | Rolling Reserve? | Contract Term |
|---|---|---|---|---|
| CBD (retail) | 3.0–4.0% | 4.5–6.5% | Sometimes (5–10%) | Month-to-month preferred |
| Firearms (FFL dealer) | 2.8–3.5% | 4.0–5.5% | Rarely | Month-to-month available |
| Supplements (retail) | 3.0–4.0% | 4.5–6.0% | Sometimes | Often annual |
| Smoke / Vape (retail) | 2.5–3.5% | 3.5–5.0% | Rarely | Month-to-month available |
| Adult (physical retail) | 4.0–5.5% | 6.0–8.0% | Usually (10–15%) | Often multi-year |
The Rolling Reserve Trap
Many high-risk processors require a rolling reserve — they withhold a percentage of every transaction (typically 5–15%) and hold it for 3–6 months as a chargeback buffer. This is cash you've earned that isn't in your bank account.
Rolling reserves are legitimate risk management tools. The trap is that predatory high-risk processors:
- Set reserves unreasonably high (15–20%) with no clear release timeline
- Combine high reserves with high processing rates — double-dipping on "risk"
- Bury reserve terms in addenda that merchants don't read at signup
- Delay reserve releases beyond the disclosed window when merchants try to switch
Before signing with any high-risk processor: (1) Get the reserve percentage in writing. (2) Get the release timeline in writing — 90 days, 180 days, specific. (3) Confirm what triggers reserve release. (4) Ask what happens to reserves if you close the account. If any of these are verbal-only, walk away.
How to Reduce Your High-Risk Classification
Being classified as high-risk isn't permanent. Processors reassess risk based on demonstrated chargeback performance and business stability. Here's what moves the needle:
Keep chargebacks below 0.5%
The Visa threshold for "excessive chargebacks" is 0.9% (transactions) and 0.9% (volume). Mastercard's threshold is 1.5% (transactions). Staying well below these benchmarks — ideally under 0.5% — is the strongest signal that you're a low-risk merchant despite your industry classification. Use strong transaction descriptors, clear refund policies, and proactive customer service to prevent disputes before they become chargebacks.
Build 12–24 months of processing history
New businesses in high-risk industries face a bootstrap problem — you need clean history to get good rates, but you can't build history without being approved. The path through is: accept a slightly higher initial rate, process for 12–24 months with a clean chargeback record, then renegotiate or switch to a better-priced processor with your history as leverage.
Separate business and personal credit
Business credit scores are assessed separately from personal FICO. A business with strong payment history, established banking relationships, and no NSFs will qualify for better processing terms than the owner's personal credit suggests. If your personal credit is below 620, prioritize building business credit through a dedicated business bank account with 12+ months of consistent activity.
FeeShield's Approach to High-Risk
Most processors treat high-risk as binary — you're in or you're out, and if you're in, you pay whatever they quote. FeeShield's approach through Echelon Payments is different: we assess each business individually, prioritize in-person retail (which carries materially lower chargeback risk than online), and price based on your actual risk profile — not your industry's worst-case reputation.
Our approval rate for high-risk applications is approximately 95% for physical retail operations in New England. Online-only high-risk businesses face more scrutiny, and some verticals (cannabis, adult online) have limited options regardless of the processor.
High-risk merchants are often the best candidates for cash discount programs — because you're already paying elevated processing rates, the savings from eliminating card fees entirely are proportionally larger. A CBD retailer processing $50,000/month at 4.5% pays $2,250/month in processing fees. A properly implemented cash discount program brings that to near-zero. See our cash discounting compliance guide →
What to Ask Before Signing With a High-Risk Processor
High-risk processors know you have fewer options. This creates information asymmetry they exploit. Before signing anything, get written answers to these questions:
- What is the processing rate, and what is the markup over interchange?
- What are all monthly fees — PCI, statement, minimum, gateway, chargeback handling?
- Is there a rolling reserve? What percentage, and what is the release timeline?
- What is the contract term, and what is the early termination fee?
- What specifically would cause account termination, and what is the notice period?
- Who is the acquiring bank, and is this a direct relationship or an ISO arrangement?
If a processor refuses to provide written answers to any of these before signing, that's your answer.
Many "high-risk processors" are actually ISOs (Independent Sales Organizations) reselling another bank's processing. This means your contract is with the ISO, your money flows through a bank that doesn't know you, and if the ISO loses their banking relationship, you lose your processing with no notice. Ask specifically: "Are you a direct processor, or are you an ISO?" Then ask who the acquiring bank is, and verify the ISO's registration with the card networks.
Frequently Asked Questions
Can I use Square or Stripe if I sell CBD products?
No. Both explicitly prohibit CBD in their terms of service. Processing CBD through Square or Stripe will result in account termination — often without prior notice, and often during a peak sales period. The risk isn't worth it when legitimate high-risk processing options exist.
My business was terminated by Stripe. Can I get approved elsewhere?
Usually yes. Stripe terminations for prohibited industry (not for fraud or excessive chargebacks) don't go on your permanent record with card networks. You'll need to disclose the termination to new processors, but a legitimate business with a clean chargeback history that was simply mismatched with a standard processor is generally approvable through a high-risk specialist.
Is there a free audit for high-risk merchants?
Yes. FeeShield's fee audit is free regardless of industry. If you're currently processing in a high-risk vertical and want to know whether your rate is competitive, submit your statement using the contact form →. We'll compare it against what you'd pay through Echelon Payments and give you the numbers.
What if my industry isn't listed here?
The high-risk designation covers dozens of industries beyond the ones listed — travel agencies, MLM businesses, bail bondsmen, nutraceuticals, collection agencies, and more. If you've been declined or quoted unusually high rates, contact us. We'll tell you directly whether we can help.