Small Business Tips

ANSWERED: Does Your Liquor Business Need a High-Risk Merchant Account?

Aug 22, 2024 • 4 min read

What do we mean when we classify a business as high-risk? It may surprise you that it has less to do with the physical security of your store and more to do with the financial side of things.

Some merchant services consider liquor stores as “high-risk.” This isn’t just a minor category to shrug off — being labeled a high-risk business can have real consequences.

In this article, we’ll cover everything you need to know about high-risk merchant accounts for liquor stores including:

By understanding the requirements, risks, and benefits of a high-risk merchant account, you can make the right choice for your growing liquor business.

High-Risk Payment Processing: The Basics

When credit card or digital payments are processed they are held in a merchant account before they’re transferred to your business’ bank account. Payment processors treat businesses differently if they are considered “high risk”. Some payment processors will not work with high-risk businesses at all.

A business is typically deemed high risk if they:

  • Offer age-restricted or adult products
  • Have a high risk of fraud or credit card chargebacks
  • Offer products like CBD, vape, or other products that are in legal limbo
  • Have consistently high transaction amounts
  • Are highly regulated (such as firearms industries)
  • Primarily do business internationally
  • Have a bad credit history

Some payment processors require you to submit an application that details your business operations before they agree to work with you.

High-Risk Merchant Accounts vs. Regular Accounts

There are a few key differences between a high-risk merchant account and a regular account.

  • Higher costs: Some (but not all) high-risk accounts charge higher transaction fees.
  • Better equipped for chargebacks: High-risk processors are generally more tolerant of chargebacks. This is important because many regular accounts will charge high fees or increase transaction fees after a certain number of chargebacks.
  • Increased security: High-risk and industry-specific processors have enhanced fraud protection and security measures built in. 
  • Offer modern payments: Industry-specific processors allow high-risk businesses to offer contactless payments, credit cards, and other convenient payment methods. 
  • Required rolling reserve: Some high-risk accounts must keep a rolling reserve. This is a percentage of your transactions held by the merchant for a certain period to handle things like chargebacks and disputes. It could affect your business’ short-term cash flow.

Does Your Liquor Store Need a High-Risk Merchant Account?

The short answer is yes.

Because alcohol is age-restricted, many payment processors consider it high-risk. This is especially true in alcohol control states where liquor sales are much more highly regulated. 

If you also plan to take advantage of online sales for your liquor store, a high-risk processor is a must.

You would think the extra restrictions and licenses you need to get as a responsible liquor store owner would lower your risk. Unfortunately, that isn’t the reality. Many big-name payment processors are more concerned about maintaining their reputation than making life easier for liquor store owners.

Why Working With an Industry-Specific Payment Processor Can Save You Time and Money

Being labeled as a high-risk business isn’t what any liquor owner wants to hear. It can certainly complicate things if you’re working with a generalized retail point of sale (POS) system or searching for a standalone payment processor.

However, working with the right payment partner can eliminate the stress of running a high-risk business for good. Using an industry-specific POS system like Bottle POS simplifies your finances with payment processing and other features designed for the challenges of the liquor industry.

There are many benefits of working with a POS system built for the liquor industry, such as:

  • In-house payment processing: Using a POS system with integrated payments makes the process quicker for customers and better for your business.
  • Lower processing rates: Liquor store POS systems cater specifically to liquor, beer, and wine shop owners, and offer more competitive processing rates than a general retail solution.
  • Easier financial reporting: A POS system built for liquor stores means you won’t have to transfer financial data between systems. This will help you get a real-time picture of your financial health and help you make smarter decisions. 
  • Online sales support: Many payment processors are reluctant to offer payments for online liquor sales because of the added risk of selling to minors. A liquor-specific solution will ensure your website has the safeguards you need to minimize risk and process payments.
  • Dual-pricing: Many liquor-specific solutions offer dual pricing, allowing you to set discounts on items for customers who pay with cash or debit.
  • Industry understanding: Unlike general retail, the makers of an industry-specific POS system will have a better understanding of the inherent risks and operational challenges of running a liquor store.

Pro tip: Many services offer to connect you with an independent high-risk merchant account. This option could add extra backend complexity compared to using a POS system that handles high-risk payment processing in-house. 

Simplify Your High-Risk Payments With Bottle POS

Whether you’re starting a liquor store for the first time or noticing that running transactions through your current system is slow or cumbersome, we’re here to help.

Bottle POS provides a comprehensive solution for liquor, beer, and wine stores including advanced inventory management, convenient payments, e-commerce support, reports, and in-house payment processing.

With some of the lowest payment processing rates in the industry, we’re happy to help you find ways to lower your costs and increase your profit margins.

Contact our liquor store experts today to see how.