How to Accept Credit Card Payments as a CBD Merchant?

Accounts Wizard
November 02, 2021
CBD Merchant

How to Accept Credit Card Payments as a CBD Merchant?

Are you a CBD merchant worrying over your payment processing? Are you unable to accept credit cards as a payment method? You’re not the only one! This issue has been hindering the growth of your (and others’) business for quite some time. And, while you can’t change the law, you can change your payment processor. Let’s find out how you can do it!

A Short History of CBD Industry and Its Payment Processing Issues

The CBD industry has become a rage in the past few years due to the discovery of the health benefits of cannabidiol. A lot of people have become interested in this natural medicine, which lead to the development of this industry. Many pharmaceutical companies started producing CBD products and many new CBD-based companies started operating on the market. And, while this industry is blooming, merchants have a hard time with their CBD payment processing. This is because they are considered high-risk businesses, why?

A CBD business is considered a high-risk business because it sells products containing a chemical that’s not regulated by any law in the US nor has been approved for use.

While FDA recognizes the potential benefits of CBD and products containing the same, it’s aware that some companies violate the FD&C Act (Federal Food, Drug and Cosmetic Act and may put the consumers’ health at the risk. Therefore, they have created strict regulations against the sale and consumption of CBD products. As a result, banks and credit card companies don’t want to get involved and take a risk in this growing industry.

CBD and Legal Issues – The Root of All You Payment Processing Troubles

CBD products were listed as Schedule I drugs by DEA until late 2018. This meant any sale, transportation, and use were prohibited under federal laws. But that changed when many states have passed laws that legalized the use of marijuana and cannabidiol products for medical purposes. Some of them have even legalized marijuana for recreational use and lifted most bans against CBD products.

The 2018 Farm Bill changed some things. CBD products were removed from the Schedule I list; however, you had to be a licensed grower and comply with all relevant state and federal laws to be allowed to produce and sell CBD products legally.

Things were going in a good direction and companies started accepting CBD merchant accounts. However, this didn’t last long because of a lack of quality control. Namely, not all products contained less than the allowed 0.3% THC. Also, the risk was great. And, while the CBD industry is growing each day, the FDA still considers ingestible CBD products like gums, tinctures, and edibles illegal. In fact, it doesn’t approve the use of these products for any other purpose other than epilepsy.

How to Accept CBD Credit Card Payments?

You can’t change the laws or lose customers because you can’t accept credit card payments. However, you can find a reliable CBD payment processor.

These payment processors allow CBD sellers to open a CBD merchant account and accept various types of payment. Finding a reliable payment processor allows you to accept electronic payments and helps you grow your business.

In order to start accepting credit and debit cards, you need to open a CBD merchant account.

What Is a CBD Merchant Account?

A CBD merchant account is a merchant account that can be legally used for selling CBD products. It’s perfect for businesses that sell products containing cannabidiol.  Opening one at your chosen payment processing provider will allow you to start accepting payments.

Why Should You Open a CBD Merchant Account?

Having a CBD merchant account protects your business in various ways. First, since the CBD industry operates in a so-called “legal gray” area, it’s prone to card fraud. Second, due to the unproven health benefits of CBD, your business is at a higher risk of chargebacks. These chargebacks would come from clients who are not satisfied with the product.

CBD Merchant Account Features

Apart from protecting you from frauds and chargebacks, a CBD merchant account also provides you with:

  • Less than 1-week waiting time before you are allowed to start processing payments
  • Secure payment gateway
  • Lower processing rates
  • Fraud prevention and protection
  • Chargeback alerts and disputes
  • Multi-bank processing, including off-shore
  • ACH/Check 21 processing
  • Fast settlements to merchants
  • No reserve required

Choosing the Right CBD Payment Processor

Many payment providers claim to take care of your CBD payment processing. Unfortunately, not all speak the truth. Due to being a booming and high-risk industry, there’s a great chance of scam payment companies.

To make sure you stay away from them, we suggest you find a company that has extensive experience providing payment services to high-risk businesses. Also, you should check if they are registered businesses in your state and that they have good reviews.

We know finding a reliable CBD payment processor is a real quest. That’s why we’ve compiled a list of things you need to consider before choosing your processor.

Things to Consider When Choosing a CBD Payment Processor for Your Business

     1. Ability to Deal with High-Risk Transactions

Your processor should have extensive experience serving high-risk industries like the adult industry, dating sites, the kratom industry, the gambling industry, cryptocurrency trading, vape and e-cigarette companies, etc.

     2. Low Fees

Due to serving high-risk industries, CBD payment processors tend to have sky-high fees. Some of them even ask for an upfront fee (deposit) and lower the risk of working with a high-risk business like yours. Others provide their services at an affordable rate. Go for them!

When checking on the fees, don’t consider only the monthly/annual fee and transaction fees but also look at statement fees, compliance fees, non-compliance fees, and terminal fees. And, don’t forget to check for hidden fees. They aren’t displayed on the processor’s site nor FAQs but usually in their Terms and Conditions. So, make sure you read everything well and get informed before making your decision.

     3. Seamless Integration

You wouldn’t like to switch the platform of your e-commerce site, would you? Nobody does! It means all time and money you’ve invested into your online store have gone down the drill. Therefore, when choosing a CBD payment processor, you should choose one that seamlessly integrates with your existing platform.

Choosing a processor that can integrate with a broad scope of e-commerce software will not only ensure sleek integration but will also support you as your company grows. We’d suggest using a CBD payment processor that operates using API integration. Processors with API payment gateway allow you to monitor them and give you an insight into how your customers feel about your store.

     4. Point-of-Sale Availability

Choosing a CBD payment processor with a POS (point of sale) availability will help you deal manage online and offline transactions. It will also cut your office work costs. What’s even more important, it will help increase your business’ profitability and customer loyalty thanks to providing you with accurate reporting. And, you can use it to control stock input and output from one place.

    5. Customer Support

Who would you call if you had a problem with your transactions? The customer support of course! You rely on their knowledge and skills to help you solve any issues you may encounter. Also, they are the ones dealing with customers and their issues, which is why you need customer support that will respond to customers’ queries effectively and fast. In a way, they represent you as a business, so you have to choose a CBD payment processor with a superb customers support team that will provide a high-end service to your customers.

    6. Reasonable Contract

Some CBD payment processors want to capture their clients (YOU) in their net and hold them for many years. And, getting into a lengthy contract is absurd because you may not want to work with them after some time for any reason.

To prevent yourself from getting trapped into an exhausting relationship, choose a processor that either won’t ask you to sign a binding contract or will ask you to sign a short-term, optionally renewable contract. Either way, make sure they offer you good conditions.

The Perfect CBD Payment Processor

The perfect CBD payment processor for your business should thick the boxes of the following features:

  • Fraud protections
  • Data security
  • Chargeback management
  • Transparent pricing and billing practices
  • Great variety of payment processing tools and merchant tools
  • Regulatory requirements
  • Is your partner and guides to through the entire process
  • Knows the types of CBD products you sell

The Benefits of Using a CBD Payment Processor

Since cannabidiol still isn’t fully legalized and CBD businesses face payment issues, choosing a CBD payment processor is the best you can do for your business. It will not only allow you to accept credit card payments but also protect your business from frauds and unfounded chargebacks.

But, let’s look at all benefits of using a payment processor for your CBD business.

  1. Accepting Credit and Debit Card Payments

Due to the unclear status of CBD and the legal issues in the US, CBD businesses are considered high-risk businesses and, as such, aren’t allowed to accept credit nor debit card payments. This negatively affects them since almost half of the customers prefer buying with a credit or a debit card. However, if you choose a CBD payment processor, you’ll be able to accept credit and debit card payments. This will not only make running your business easier but will also increase your sales and grow your business.

     2. Merged Payments

Using a CBD payment processor allows you to integrate it with your e-commerce platform and start accepting credit and debit cards right away. Also, it allows you to merge various types of payments in your workflow, such as billing, accounting, CRM (customer relationship management), and others.

     3. Fraud Protection

Since cannabidiol isn’t quite legalized in the US, CBD-based businesses are at great risk of fraud. Choosing a reliable processor will protect your business from fraudulent actions and unfound chargebacks. They monitor and track each transaction to make sure everything is alright.

     4. Multiple Payment Options

Using CBD payment processors allows you to offer multiple payment options to your customers. Apart from accepting credit and debit card payments, you’ll offer payments via bank transfer, prepaid cards, gift cards, and a buy-now-pay-later option.

    5. Better Customer Service

Your customer service is your voice in front of the public. Having a stellar customer support team that is available 24/7 will take your business to the stars. It’s because they are always there to support your customers with whatever they need and resolve any issues or complaints. Most importantly, they protect your business from fraud and ensure data security.

    6. Less Financial Mistakes

With a CBD payment processor by your side, you won’t have to worry about financial differences and account errors. It’s because they track every transaction and change in your account to ensure everything is correct.

    7. Business Growth

Your CBD payment processor is your best friend. It takes care of the smooth running of your store’s payment processes, protects you from fraud, and allows customers to pay with a payment option of their choice. They offer a lightning-fast payment operation to ensure customers don’t waste their precious time.

By doing all of this for you, your processor supports your business and helps you grow the same. With the right CBD payment processor, only the sky is your limit!

Beware the Scammers!

Since the CBD industry is quite new and still evolving, the number of CBD payment processors is small. However, that doesn’t mean they are all reliable. There are claims that many CBD business owners have been victims of merchant account scams. This caused them to lose tens, even hundreds, of thousands of dollars.

Therefore, when choosing a CBD payment provider, do good research, “ask around” for others’ opinions, and read reviews. Also, check if the provider is a registered business and read their promises. If what they offer is too good to be true, it probably is.


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