How Credit Card Processing Works: A Guide for High-Risk Merchants
Whether you’re running a peptide business, a CBD shop, or an online firearms store, accepting credit cards is the lifeblood of e-commerce. But what actually happens when a customer swipes, taps, or clicks “Buy Now”? Understanding how credit card processing works helps you make smarter decisions about your payment stack—especially if you operate in a high-risk industry.
Here’s a simplified breakdown of how processing works and why it matters for your business.
The Players in Payment Processing
Several key players are involved in moving money from your customer’s wallet to your business bank account:
- Cardholder Your customer.
- Merchant That’s you, the business accepting payments.
- Payment Gateway A secure bridge between your website and your processor (think of it as the checkout system).
- Payment Processor The company that manages the transaction and communicates between parties.
- Merchant Acquirer (Acquiring Bank) The bank that provides your merchant account and deposits funds.
- Card Network (Visa, MasterCard, etc.) The rails that route the transaction.
- Issuing Bank The customer’s credit card bank.
What Happens When a Payment is Made?
Let’s break down a typical transaction flow:
Authorization
- A customer enters their card info on your checkout page.
- The payment gateway securely encrypts and forwards that data to the processor.
- The processor contacts the card network (e.g., Visa).
- The card network requests approval from the issuing bank (e.g., Chase).
- The issuing bank checks for available funds or credit and fraud risk.
- The transaction is approved or declined in seconds.
Batching & Settlement
- At the end of the business day, approved transactions are batched together by your processor.
- This batch is sent to the acquiring bank, which deposits the funds (minus processing fees) into your business account.
- Settlement typically occurs in 1–3 business days.
Funding
- You receive the net amount after fees and any reserves.
- In a high-risk account, your funding may include:
- A rolling reserve (e.g., 10% held for 6 months)
- Delayed settlements
- Higher fees due to risk exposure
The Role of Merchant Accounts
To process credit cards, you need a merchant account —this is NOT the same as your business bank account.
A high-risk merchant account is specially underwritten to support industries with:
- Regulatory scrutiny
- Higher chargeback rates
- Delayed fulfillment or future delivery (e.g., travel, furniture)
- Legal gray areas (e.g., CBD, kratom, nutraceuticals)
If you're in one of these verticals, a standard Stripe or Square account won’t last. They often shut down accounts without warning, freezing your funds and killing your cash flow.
Why Risk Level Affects How You Process
High-risk businesses face unique payment challenges:
Risk Factor | Impact |
Chargebacks | Higher fees, rolling reserves, stricter underwriting |
Regulatory Compliance | Need for KYC/AML checks, PCI compliance, FFLs, age-gating |
Industry Type | Some processors flat-out decline entire categories (firearms, CBD, adult, etc.) |
Reputation Risk | Banks don’t want media blowback from controversial sectors |
That’s why working with a specialist high-risk processor like High Risk Merchant Bank is critical.
What Makes a Good High-Risk Processor?
If you’re in a regulated or restricted space, look for a processor that offers:
- Experience in your industry
- No hidden fees or outrageous reserves
- Chargeback mitigation and fraud tools
- Compliance support (PCI DSS, product legality)
- Integration with your shopping cart or CRM
- Fast funding and transparent reporting
Final Thoughts
Processing payments is more than just collecting money—it’s about building a stable foundation that helps your business scale without disruption. If you’re a high-risk merchant, you deserve a partner who understands your unique challenges.
High Risk Merchant Bank specializes in helping companies like yours stay live, stay paid, and stay compliant.