How to Open an Online Headshop Merchant Account?

Are you a headshop store owner? Then, you probably face credit card payment processing issues. You’re not able to accept credit or debit cards as a payment option. And, this is definitely devastating for your business since you lose customers and can’t operate internationally.

Well, you’ll be thrilled to read that there is a way to start accepting credit card payments on your Online Headshop. Let’s find out how!

Headshops Stores have increased in the past decades thanks to the increased interest in medical cannabis and homemade cigarettes. More people have started using cannabis for medicinal purposes and smokers started using modern smoking equipment. Some even want to roll their cigarettes themselves. This led to increased interest in buying products like bongs, glassware, cigarette cutters, grinders, pipes, pipe cleaners, etc.

Besides the great interest in these products, running a headshop business isn’t that easy nowadays. This is mostly because of the way consumers shop: with a credit card. While this is more convenient for both parties, headshop owners face some issues due to the industry they operate within. The greatest issue of all is not being able to accept credit or debit cards in-store and on their webshops.

Why Don’t Headshops Accept Credit Cards?

The short answer is: because headshops are considered high-risk businesses. This is primarily because they sell products closely related to cannabis and tobacco. Although they don’t actually sell cannabis and tobacco, they do sell the gear used for smoking/inhaling them.

While these products can be legally sold, there are many regulations regarding the way they are sold and marketed, which puts this industry in the gray area. Namely, you sell products like water pipes, bongs, grinders, etc, but you don’t know if your clients will use them for tobacco or illegal drugs. That’s the biggest problem.

Another reason is that financial institutions are continuously tightening the tobacco underwriting rules.

Also, there is the age restriction, which requires headshops to ensure their buyers are adults (age 21) before selling them their products. Unfortunately, there’s no way to confirm whether the person buying from your store is actually the card’s owner nor verify their age.

As a result, banks and payment processors see these businesses as prone to legal issues, frauds, and chargebacks and don’t want to work with them.

Not being able to find a payment processor that will allow them to accept credit cards, online headshops are losing customers and can’t grow their business. It also discourages entrepreneurs from exploring this industry and starting a headshop business.

Is Selling Paraphernalia Legal?

Paraphernalia is the equipment used for smoking tobacco and cannabis. It’s often referred to as drug paraphernalia because it’s been mostly used for inhaling only drugs in the past. However, as times have changed, so did people’s habits. With time, people started using paraphernalia for preparing tobacco and smoking/vaping medicinal cannabis.

Since these products are related to drugs, there’s the question of whether selling paraphernalia is legal or not?

There’s no simple yes/no answer but one that needs a bit of explaining.

You see, drugs and drug paraphernalia are illegal. As the U.S. Code Title 21 Section 863 states, it is “unlawful for any person to sell or offer for sale drug paraphernalia; to use the mails or any other facility of interstate commerce to transport drug paraphernalia; or to import or export drug paraphernalia.”

However, paraphernalia can be used for other things as well. Namely, you can use pipes for smoking tobacco, grinders for grinding tobacco before rolling it into the cigarette, and bongs for inhaling medicinal cannabis. Hence, the paraphernalia sold in headshops becomes drug paraphernalia only after customers buy the product(s) and use it illegally.

Since Headshops don’t sell drug paraphernalia but smoking gear, selling it is completely legal.

How to Accept Headshop Credit Card Processing?

Not being able to accept credit card processing is devastating for your business. Fortunately, now there is a way to allow your customers to pay with a credit or a debit card in your webshop. It’s by opening an online headshop merchant account!

The only thing you need to take care of is finding a reliable high-risk payment processor, like us. These processors specialize in high-risk payment processing and offer merchant accounts for your business needs. They are experienced in handling high-risk merchant accounts and provide domestic solutions for credit card processing, unlike processors that offer off-shore payments.

Why Should You Open an Online Headshop Merchant Account?

The most obvious reason why you should open an online headshop merchant account is that you can’t open a regular bank account. Even if you, somehow, manage to open a bank account, you will pay high fees, interest rates, recurring billing charges, and other processing fees. Also, there are many legal hoops you may fall into. Plus, you are responsible for the smooth processing of your account and its safety.

Another reason is that banks and payment processors don’t want to work with high-risk businesses like yours. There’s a great chance for fraud, chargebacks, and hackers stealing from each transaction, which would cause them financial loss. And, that’s something they don’t want to risk.

Now, let’s shift from the negative to the positive reasons why you should open an online headshop merchant account.

First and foremost, because high-risk payment processors are willing to work with you. They are not afraid to risk because they are experts in the field and know how to handle safe credit card processing. They, not you, ensure smooth transactions and the safety of your payment processing and account.

Another reason is that these payment processors have affordable rates. It won’t cost you arms and legs to operate legally and accept credit card payments in your online store. On the contrary, their fees are low and applying for a high-risk merchant account is free.

Also, you will be able to provide your clients with an exceptional online shopping experience. Apart from keeping your current customers happy, you’ll be able to attract new customers by providing various credit cards.

And, last but not least, opening a merchant account at a high-risk payment processor gives you the freedom to work with your fullest potential. You are entitled to unlimited sales per month, an unlimited amount of money per transaction, highly secured transactions, a lower chance of chargebacks, and more.

In short, with an online headshop merchant account, you have the freedom to operate your business legally, with full potential, grow your business locally, and expand it internationally. You have all the tools and services you need for flawless operation without the limits imposed by banks and payment processors.

How to Open an Online Headshop Merchant Account?

Opening an online headshop merchant account is free and easy. All you need is to find a reliable high-risk payment processor that offers services tailored to your needs. Then, you simply apply through their online application form, usually found on their homepage. After that, you have to wait for their response, which is usually the same day. Of course, the application process depends on the payment processor you choose.

Types of Headshop Merchant Accounts

Before opening a merchant account for your online headshop, you need to know the types of headshop merchant accounts. While this depends on the processor your choose, usually these are the three types of headshop merchant accounts, based on your business:

• Merchant account for retail shops – This type of merchant account is perfect for brick-and-mortar headshops who want to accept credit cards as a payment option. Although banks might approve a merchant account for a retail store, it usually doesn’t happen. Plus, opening a high-risk merchant account is much better than opening a low-risk one.
• Merchant account for e-commerce – This type of merchant account is ideal for online headshops. Since it’s pretty impossible to be approved for a bank account, online headshops can’t accept credit card processing. Having a merchant account at a high-risk payment processor will allow you not only to accept credit cards but also to ensure secure transactions and smooth payment processing. Moreover, there’s an option for integration with shopping carts, such as Shopify and WooCommerce (depending on the processor), which allows for quick and easy synchronization.
• Merchant account for wholesalers – The last of the three types is suitable for large wholesale headshops. Opening this type of merchant account will allow you to process large ticket transactions. Also, you get fraud prevention tools to ensure your account’s safety.

Online Headshop Merchant Account Requirements

If you are preparing to apply for a merchant account, you need to make sure you have several types of documents. While the exact documentation depends on the payment processor, some of the common documents required are:

• Personal information – You will have to write your full name, social security number, address, and phone number.
• Government ID copy – Having a color copy of your government ID is needed for completing your file and confirming your personal information.
• Business bank statements and merchant account statements – These two types of statements provide all information regarding your company’s financial history. And, that is essential when deciding whether you will be approved a merchant account or not. Underwriters want to know your finances, analyze your transactions, analyze chargebacks and returns and check their rate, and more. They gather all information about your finances to see if your company will be able to handle the payment processor’s monthly fees, refunds, and chargebacks.
• Voided bank check – This document guarantees that the settlement account is set up properly so that there are no delayed payouts to the merchant. Since many applications have a banking account incorrectly filled, the voided bank check will help underwriters verify that that banking information is correct.
• Completed online application – Having your application completely filled out before applying will help speed up the reviewing process. Failing to do so may result in denying your account because the underwriters may suspect you hide something on purpose. Also, if the application is not complete, you may experience days of delays until the account is finally approved.
• Online presence proof – If your headshop is present on social media, you might be asked to provide a link to the website and/or social media profiles.

Having all of them is a must because underwriting headshops is more critical than underwriting other industries and they will serve as support for approving your account.

Apart from these supporting documents, sometimes underwriters may require additional documents or conditions. Those are:

• Photos of your store and inventory – Asking for photos of your store and inventory serves as proof of your company’s location and products.
• Verification of orders – To verify your transactions, the payment processor calls random customers to confirm their orders and which product(s) they have received.
• Following the website guidelines – Since you are a high-risk business, some payment processors require you to agree to follow their website guidelines. In fact, the underwriters may ask you to make changes in order to comply with their rules.
• Business model – Some payment processors may ask you to share your business model or revenue plan to see your ideas and how your company operates.

Benefits of an Online Headshop Merchant Account

Ok, so, we’ve explained all you need to know about an online headshop merchant accounts and how to open one. Now lets identify and summarize some of the Benefits.

Having a merchant account for your online headshop:

• Allows you to accept credit and debit cards – This keeps your customers happy and attracts new ones.
• Increase your sales – By attracting new customers, your sales increase!
• Supports your business growth – Ever dreamed of running an international company? A high-risk merchant account allows you to do that as it allows you to accept all major international payment options.
• Great safety – Your transactions are secured end-to-end, so you don’t have to worry about hackers stealing from your or your clients’ accounts.
• Reduced risk of losing your merchant account – Your headshop merchant account provider approves your inventory, thus allowing for fast payments. This reduces the risk of locking, freezing, and terminating your merchant account.
• Reduced chargebacks – The risk of a high chargeback rate of headshops and other high-risk businesses is great. Fortunately, with a high-risk merchant account, you are protected from false chargebacks thanks to its anti-fraud and anti-chargeback features.