What Kind of Merchant Account Does an Online Business Need?
Online businesses are growing faster than ever—whether it’s eCommerce, CBD, dating, vape products, health and beauty, or adult content websites.
While many companies have been shifting toward digital models for years, the past few seasons have seen an even sharper rise in online entrepreneurship.
Take clothing retail, for example: more brands are moving from physical stores to eCommerce platforms. But this shift can also change your merchant risk status—you might go from having a low-risk merchant account to needing a high-risk merchant account.
To understand what this means for your business, let’s explore what merchant accounts are, and how to choose the right one.
What Is a Merchant Account?
A merchant account is a specialized type of business account that allows you to accept and process customer payments made via credit or debit cards.
Once a transaction is processed, the funds are transferred from the customer’s card to your merchant account before being deposited into your business bank account.
For online businesses, having a merchant account is essential—especially if you process payments daily.
When applying for one, your business will generally fall into one of three categories:
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Low-risk
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Medium-risk
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High-risk
Most online-only companies are automatically categorized as high-risk due to the “card-not-present” (CNP) nature of online transactions.
Low-Risk Merchant Accounts
A low-risk merchant account usually comes with lower processing fees and fewer restrictions. However, not every business qualifies.
Banks and payment service providers evaluate your business’s industry, financial history, and transaction volume before assigning a risk level.
To qualify as low-risk, your business typically must meet these conditions:
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Average transaction value under $50
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Monthly processing volume below $20,000
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Minimal chargebacks and fraud
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Financial stability and strong credit
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Operating for several years (not newly launched)
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Primarily card-present sales (80–85%)
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Located in low-risk regions like the U.S., Canada, Japan, or Australia
For example, a local auto parts store with both a physical and online presence might qualify as low-risk if the majority of its revenue comes from in-person sales.
Common Low-Risk Industries
Here are some examples of industries often considered low-risk:
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Clothing and apparel
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Pet supplies
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Auto parts
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Office or home goods
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Books, DVDs, and stationary
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Parking services
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Home and garden products
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Moving companies
These businesses generally have consistent transaction histories, low chargeback rates, and steady monthly volumes.
If you’re interested in learning how to grow your small business, check out our business growth tips for entrepreneurs.
High-Risk Merchant Accounts
If your business operates entirely online, you’re likely to fall into the high-risk merchant category.
This doesn’t mean your business is unsafe or illegitimate—it simply indicates that payment processors view your transactions as riskier due to higher chances of chargebacks or fraud.
Common High-Risk Industries
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Adult entertainment and content
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Online dating platforms
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CBD and vape products
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Cryptocurrency businesses
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Fantasy sports and gaming
Industries like adult content or dating often face reputation-related concerns and elevated chargeback rates.
For instance, online dating sites sometimes experience “friendly fraud,” where users dispute legitimate charges to hide them from others.
Understanding Chargebacks
A chargeback occurs when a customer disputes a transaction and the bank reverses the payment.
High chargeback ratios can seriously damage your business’s reputation and lead to higher processing fees—or even account termination.
Online businesses, especially subscription-based services, are more prone to chargebacks because transactions happen without a physical card present.
Card-Not-Present (CNP) Transactions
Whenever a sale happens online or over the phone, it’s known as a Card-Not-Present (CNP) transaction.
While convenient, these transactions are more vulnerable to fraud, which is why many eCommerce stores are labeled high-risk.
To manage CNP risks, businesses should use secure payment gateways, enable 3D Secure, and monitor transaction patterns to detect suspicious behavior early.
Reputational Risk Factors
Some industries are also considered high-risk simply due to public perception.
For example, adult entertainment, CBD, or nightclubs may be seen as controversial, and certain banks avoid partnering with them to protect their brand reputation.
If you’re working in a high-risk niche, it’s vital to partner with the right payment provider and follow business compliance practices to protect your brand.
Final Thoughts
Knowing what type of merchant account your online business needs is essential for smooth operations and financial security.
If your business mainly processes transactions online, you’ll likely need a high-risk merchant account—and that’s perfectly fine.
The key is to understand your payment structure, minimize chargebacks, and maintain a strong reputation with your processor.
With the right setup, you can process payments efficiently and keep your business running smoothly, no matter the industry.