Home » Does PayPal Offer a High-Risk Merchant Account?

PayPal is one of the biggest names in online payments. It’s easy to use, quick to set up, and trusted by millions of people worldwide. But when it comes to high-risk businesses, PayPal is not a good option — in many cases, it causes more headaches than it solves.

In this short article, we’re going to break down why PayPal is a poor choice for high-risk merchants, what you can do to protect your business, and what your options are if PayPal decides to freeze or shut down your account. 

Plus, we’ll show you a better path forward if you’re running a business that needs a reliable, high-risk merchant account.

What is “high risk” for PayPal?

In general, a business is considered high-risk if it operates in an industry that has a higher chance of chargebacks, fraud, legal issues, or regulatory scrutiny. Think adult entertainment, supplements, CBD, firearm sales, travel services, and even online ticket sales. 

These merchants aren’t doing anything wrong — it’s simply that the nature of their business carries more risk for payment processors.

When it comes to PayPal, they aren’t super transparent about every type of business they consider high-risk, but they do give some hints in their Acceptable Use Policy and User Agreement.

If your products, services, or business model could lead to a high number of customer disputes, refunds, fraud reports, or legal concerns, PayPal is likely to label you as high-risk. That can mean account freezes, rolling reserves (where they hold part of your money), or even outright termination.

On top of that, here are some general restrictions you can face with a PayPal business account:

• Instant account holds or freezes with little to no warning.
• Delayed payouts and rolling reserves that tie up a percentage of your sales for months.
• Strict limits on the size of single transactions and monthly sales volume, especially for newer accounts. 
• Higher fees compared to traditional merchant accounts. Additionally, if your dispute rate is over 1.5%, PayPal applies a High Volume Dispute Fee ($30) instead of the standard rate ($15).
• No dedicated risk support — you’re often stuck dealing with automated messages and limited appeal options.

Why PayPal allows almost anyone to sign up if they are just going to terminate their account?

Why even let people sign up so easily if they’re not going to support their business?

The answer has to do with how PayPal (and similar companies like Stripe and Square) are built. Unlike traditional payment processors — who perform full underwriting before approving your account — PayPal does almost no underwriting upfront. 

Traditional processors take a few days to review your business, check your financials and past processing history, look at your website, etc. PayPal, approves you right away and conducts serious risk reviews after you start processing payments.

This model is called “post-approval underwriting.” It’s faster and makes it easier for more people to start selling online, but it also means that PayPal is constantly monitoring your transactions behind the scenes. If anything looks suspicious — or if they decide your business is riskier than they’re comfortable with — you can find yourself facing sudden freezes, account limits, or shutdowns.

As a merchant service provider, we often get contacted by merchants who got burned by using PayPal and other payment aggregators. Here is just one example:

We grew really fast this year and Stripe and WePay would pause my account out of nowhere and I wouldn’t even know until I saw orders weren’t being processed. I could only contact them by email and they’re extremely slow. I’d send them all the documents they’d need but it’s not a very efficient process and I lose thousands of dollars every time this happens. As I grow our brand, I need something more reliable.

PayPal’s easy signup process is great for start-ups and low-risk businesses. But if you’re operating in a high-risk space, it’s better to open a high-risk merchant account from the start. 

How to avoid PayPal’s high-risk status?

If you’re using (or plan to use) PayPal and are concerned about being flagged as high-risk, there are specific steps you can take to reduce your chances of running into problems.

Here are a few tips to help you stay off PayPal’s radar:

• Be 100% honest during setup: Ensure that your business name, website, and product descriptions accurately match what you’re selling. If PayPal sees a mismatch later, they’ll assume you were trying to hide something.
• Keep your website legit and up to date: A clean, professional website with clear policies, especially refund and privacy policies, builds trust and reduces risk.
• Avoid sudden spikes in sales: Huge, unexpected increases in your transaction volume are a red flag for fraud. If you’re planning a big promotion or expecting a spike, let PayPal know in advance.
• Minimize chargebacks and disputes: Too many customer complaints or refund requests will make PayPal nervous fast. Good customer service goes a long way.
• Follow their Acceptable Use Policy: Make sure you’re not selling anything restricted, even if you think it’s a gray area. PayPal tends to play it safe and may shut down accounts over even minor violations.

What happens if you still get flagged?

1. Best-case scenario: They place a rolling reserve on your account and subject you to more frequent audits.  
2. Worst-case scenario: They freeze your entire balance and permanently limit your account. This makes it difficult to retrieve existing funds and completely cuts off your ability to process payments.

What to do if your PayPal high-risk merchant account is terminated?

First, it helps to understand why they took action. Some of the most common reasons PayPal freezes or terminates accounts include:

• Too many chargebacks or refunds
• Operating in a prohibited or restricted industry
• Inconsistent or suspicious account activity
• Violations of their Acceptable Use Policy
• Large, unexpected changes in transaction volume
• Receiving too many customer complaints or disputes.

Once your account is limited or terminated, you typically have two main options for moving forward.

Option 1: Check with PayPal and try to reverse their decision

If you truly believe you didn’t violate any of PayPal’s rules, it might be worth trying to appeal the decision. This option makes sense if you think your account was flagged by mistake or if you can prove you’ve fixed whatever issue triggered the problem.

Here’s what the process usually looks like:

1. Log into PayPal and head to the Resolution Center.
2. Provide all requested documentation — things like business licenses, supplier invoices, or proof of fulfillment.
3. Wait for PayPal’s review. They might respond in a few days or take several weeks, depending on the complexity of your case.

Fair warning: The success rate for reversing is quite low, and the process can be slow and frustrating.

Option 2: Find a new, high-risk merchant services provider

In most cases, the smarter move is to switch to a high-risk payment processor. These providers understand your industry and are willing to take on the extra risk that companies like PayPal avoid.

The benefits of working with a high-risk merchant account provider include:

• Better account stability — fewer surprises and random shutdowns.
• Support for industries that PayPal outright bans or restricts.
• Customized solutions tailored to your business needs.
• Access to more advanced fraud prevention and chargeback management tools.
• Higher monthly processing limits and more flexible terms.

Rather than fighting a losing battle with PayPal, find a partner that wants to work with you. It will save you a lot of time, money, and stress in the long run.

Work with a partner like SecureGlobalPay that wants your business

If you’re tired of worrying about frozen funds and sudden shutdowns, you’re not alone. At SecureGlobalPay, we specialize in helping high-risk businesses get the payment processing solutions they need without the stress.

We have been operating for almost three decades now. We understand the unique challenges you face. Our team will get you approved quickly and secure the best terms and rates possible. 

If you’re ready for a payment processor that’s actually on your side, sign up for a merchant account with SecureGlobalPay and let’s get you back to doing what you do best — growing your business.