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The Most Important High-Risk Merchant Laws in California

A lot of challenges come with being tagged as a high-risk merchant. From a high sales volume and international clientele to products or services frequently prone to fraud and even excessive chargebacks, there are several potential reasons a business is considered high risk. As a high-risk merchant, especially in California, you’re going to have a harder time finding a payment processor because banks would usually shy away from high-risk businesses. High-risk merchant laws in California are fairly strict, which can make it a bit more challenging, but protects businesses in the long run.


Laws for Merchants Considered High Risk in The Golden State


You are still allowed to accept debit and credit card payments.

Even if you’re tagged as a high-risk merchant, the government will still allow you to process credit and debit card payments if you have a high-risk merchant account

Finding the right payment processing partner will not only help you stay in business but also allow you to pay off debt and improve your business’ credit rating.


You will be required to open a reserve account.

All American states, not only merchant laws in California, require high-risk businesses to open a reserve account that’s separate from their capital. 

Since you’re a high-risk merchant, you need money to serve as a buffer in the circumstance that your business has a high chargeback rate. This ensures that the capital and revenue won’t have to suffer if there are any issues with your business.


You will need to pay higher fees.

A high-risk merchant account allows businesses that would otherwise struggle to find a payment processor to actually run their business, but it comes at a cost–higher fees compared to a low-risk merchant.

Instead of looking at it as a disadvantage, you have to remember that these higher charges also come with benefits. 

In most cases, a reliable payment processing company will charge you some extra fees for precautionary measures that will help you secure your transactions and detect cases of payment fraud faster.


The status of your high-risk business can change at any time.

California, as well as the rest of the country, follows a general rule of thumb when it comes to tagging businesses as low- or high-risk. 

When one financial institution or bank determines that you are a high-risk merchant, you will be tagged by all other institutions in your area. If you comply with the high-risk merchant laws in California and work on improving your financial standing as a business, though, your high-risk status can change.

Financial institutions may review your business periodically or you can petition to have your business reevaluated to determine whether it’s now low-risk. 


The Future of High-Risk Merchants in California

Regardless of the type of business you own, it’s very important to follow high-risk merchant laws in California. You just need to keep working on improving your business finances, train your staff to look out for cases of fraud, and make sure that you implement best practices when running your business.

Being tagged as a high-risk merchant is not easy, but there are ways to ensure smooth operations when you open a high-risk merchant account in California for your business. Contact our team to learn more about the merchant services we offer.

Ryan Kemp Zulu Shack Creative
( Director of Digital Marketing )

I am passionate about delivering results and helping my clients succeed. With my expertise in SEO, branding, and marketing, I lead the agency’s efforts to create and implement effective strategies that drive business growth. Our all-inclusive approach sets us apart from other digital media companies and ensures that our clients receive the full range of services they need for online success. If you can think of it, we can build it!

Zulu Shack Creative team members thrive on momentum. Like Zulu warriors, we strive to spearhead your idea with speed and quality.

When I’m not helping my team implement new digital marketing strategies, I enjoy playing music, hosting poker nights, reading Stephen King novels, and spending time with my wife and baby daughter.

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