Merchant Account for Vapes and E-Cigarettes

Accounts Wizard
November 05, 2021

How to Accept Credit Card Payments at Your Shop??

Do you own a vape and e-cigarette business? Are you sick and tired of facing the same payment processing problems for years? You’re not alone. A lot of businesses like yours face the same problem. And, while this issue has been around for quite some time, it doesn’t mean there’s no solution. On the contrary, there is a merchant account for vapes and e-cigarettes. Opening one is the answer to all your business prayers.

What’s the Deal with Selling Vapes and E-Cigarettes?

It’s no secret that the vapes and e-cigarettes market is massive and growing each day. There are thousands of businesses selling these products online and offline. Despite its popularity and size, this market faces a big issue of not accepting credit card payments. And, not being able to offer your customers an option to pay with a credit or a debit card means losing them.

The reason behind this issue is the type of your business. Namely, businesses that sell vapes and e-cigarettes are considered high-risk businesses. This is because:

  • These products aren’t 100% legalized nor confirmed by institutions as safe.
  • There haven’t been enough studies to confirm their short-term and long-term effects on health.
  • There aren’t regulations for this industry in most states.
  • There are additional underwriting knowledge and procedures and oversight for age-restricted products.
  • There’s a great risk of fraud.
  • FDA has some strict regulations regarding the selling, buying, and using of these products.

Why Do Banks and Payment Processors Decline to Work with Vape and E-Cigarette Businesses?

We are used to blaming the banks and payment processors for not being able to accept credit card payments. But, there’s another side of the story – the banks and payment processors’ side of the story.

Banks and payment processors don’t decline to work with vape and e-cigarette businesses because they like that. On the contrary, they would like to have more clients, but there are several solid reasons why they aren’t.

First and foremost, banks and payment processors find it hard to authenticate the buyer’s age online. Anyone can buy a vape or an e-cigarette using a credit card from an adult (a relative or a friend). They can’t see who is buying it, right? Since the federal law states that only legal age (18 and over) consumers can buy these products, the banks are payment processors can’t take the risk.

Another reason is the great chance of fraud and chargebacks, which banks and payment processors don’t want to deal with. Namely, vape and e-cigarette businesses, especially the small ones, are easy targets for fraudsters because they don’t know which precautions to take against fraud. They either can’t afford proper security measures or aren’t aware of the fragility of their business. Hence, fraudsters target these businesses and steal money from their accounts.

When it comes to chargebacks, banks and payment processors can pull the shortest straw. While paying for chargebacks is not at much of a problem for the merchants, it’s devastating for the credit card issuer from a financial aspect.

And, last but not least, there is a chance of great financial loss if the state suddenly prohibits the selling of vapes and e-cigarettes. Banks and payment processors definitely don’t want to risk everything.

Dealing with the Problem: How to Accept Credit Card Payments as a Vape and E-Cigarette Merchant?

Now, the good news in all your credit card payment issues is that you can accept them. You just need to open a high-risk merchant account.

Before we get to the process of opening a high-risk merchant account for your vape and e-cigarette business, let’s take a closer look at it and its benefits.

What Is a High-Risk Merchant Account?

As Nerdwallet defines it, a high-risk merchant account is a merchant account given to businesses that are considered to be high-risk, like vape and e-cigarette ones. These accounts are offered by specific payment processors, like WizoPay, specializing in high-risk credit card processing. This account allows you to accept credit cards and debits cards as a payment option just like regular businesses. However, unlike regular bank or credit card processors accounts, high-risk merchant accounts have a high level of security that prevents fraud and lowers the risk of chargebacks.

How Does a High-Risk Merchant Account Work?

High-risk merchant accounts work pretty much like regular merchant accounts. Namely, payments are accepted via a virtual credit card terminal or a payment gateway. However, opening one usually requires extra scrutiny, higher fees, and limitations in terms of the number of transactions.

The Difference Between a High-Risk and Low-Risk Merchant Account

In order to understand what a high-risk merchant account is, let’s compare it to a low-risk (regular) merchant account.

While it all depends on the payment processor, low-risk merchant accounts usually have:

  • Less than $20,000 monthly sales volume
  • Less than $500 average credit card transaction
  • Zero or low chargeback ratio
  • Minimal returns

On the other hand, high-risk merchant accounts have:

  • Higher cost
  • Over $20,000 monthly sales volume
  • Over $500 average credit card transaction
  • Funds delay of up to 30 days
  • Limited credit card transactions
  • High chargeback ratio (over 0.9% of total transactions)
  • The business holding a high-risk merchant account has a bad credit history

What to Expect from Your High-Risk Merchant Account?

If you want to run your business safely, you need to open a merchant account for vapes and e-cigarettes. As a holder of a high-risk merchant account, you have to be aware of all the things related to it. Apart from the things mentioned above, such as higher fees, you can also expect:

  • Chargeback fee – A fee your payment processor charges from your account in case of a chargeback.
  • Long contracts – High-risk payment processors usually offer long-term contracts to merchants. In this way, they ensure you’ll be their client for a long time, even if your business becomes a low-risk one over time. With this, they will charge you the same fees as a high-risk merchant for as long as your contract is valid.
  • Early termination fee – If you want to end your contract with the payment processor, you can expect to pay a fee. The fee depends on the mutual agreement between you and the payment processor.
  • Liquidated damages clause – Apart from the early termination fee, you can also expect to pay an additional fee for ending your contract beforehand. This is known as the liquidated damages clause in your contract, which states that you need to pay a specific amount of money because you haven’t met the terms of the contract.
  • Auto-renewal clause – This clause allows automatic renewal of your contract after its expiration.
  • Reserved money – Your payment processor may ask for keeping an additional percent of your credit card sales as a safety measure in case of fraud or chargebacks.
  • Tiered pricing – While some payment processors offer interchange-plus pricing, many offer tiered pricing that is pricier and charged per transaction.
  • Account freezing or termination – The payment processor can freeze your merchant account if your business becomes even riskier than it was at the moment of signing the contract. As a result, you won’t b able to accept credit and debit card transactions. And, if this continues, the processor can terminate your account.

How to Open a Vape and E-Cigarette Merchant Account?

Opening a merchant account for vapes and e-cigarettes is kind of a must for high-risk businesses like yours. By doing so, you will run your business following all federal laws related to vapes and e-cigarettes. Plus, you will protect your business against fraud and chargebacks.

To open a vape and e-cigarette merchant account, you need to submit the following documentation to your chosen payment processor:

  • Copy of your passport
  • Utility bill of the directors and shareholders holding more than 15%
  • Incorporation certificate
  • Shareholders’ certificate
  • Incorporation and shareholder certificate of any other company you are a shareholder of
  • Chart displaying your business’s organizational structure
  • The license number and the name of the issues if your business requires one
  • Processing history for the last 6 months
  • Test user credentials with full access to your platform

Of course, you always need to follow the instructions given by the payment processor you’ve chosen.

Benefits of Having a Vape and E-Cigarette Merchant Account

Yes, a high-risk merchant account is pricier and has some limitations. But, opening one is a must when you run a high-risk business like yours. So, get over the cost and constraints and focus on the numerous benefits of having one. Those are:

    • Credit and debit card payments – You can finally accept credit and debit card payments in your local and online shop.
    • Freedom to run your business efficiently and safely – By opening a high-risk merchant account, you will be better equipped with everything you need to manage your business more efficiently, track sales, manage customers, and keep records.
    • High sales volume processing – You’ll be able to process tens of thousands of dollars per month.
    • Freedom to run your business internationally – You can grow your business internationally by selling your products in an online shop.
  • Ability to offer recurring payments
    • Secure payments – Your credit and debit card transactions are protected from fraudsters at all times.
    • Boost your sales – By offering your customers multiple payment options, you’ll get more customers, especially in your online shop.
  • Customer support

Apart from these benefits, having a high-risk merchant account also allows you to adapt to any changes in this still-growing industry. You can rest assured your business runs smoothly, following all federal regulations. Plus, it supports your business growth at various levels, including selling locally and internationally and selling different types of vaping and e-cigarette products.

Choosing Your Payment Processor: What to Consider Before Opening a Merchant Account for Your Vape and E-Cigarette Business?

As the number of high-risk businesses grows, so does the number of high-risk payment processors. However, not every payment processor is actually what it says it is.

Many payment processors are in just for the profit without really worrying about their clients. Others promise rainbows and unicorns but you end up in a years-long contract that is devastating for your business. That’s why you need to be very careful when choosing your payment processor.

But, how decide which payment processor is the right for you?

Your merchant account should:

  • Be PCI compliant
  • Offer API integration
  • Provide Card-Not-Present (CNP) processing to allow payments when physical verification of the card isn’t possible.
  • Allows high volume units
  • Has no application fees, rather per-transaction fees
  • Helps prevent and monitor fraudulent transactions and chargebacks
  • Comes with a diverse payment platform that offers Point-of-Sale (POS) systems, physical terminals, virtual terminals, and mobile payments via Android and Apple apps.
  • ACH processing and eCheck processing facility to allow clients to pay with eChecks.
  • Highly secured payment gateways with SSL encryption to ensure the safety of your customers’ information.

In addition, the payment processor should have the following features:

  • Offers domestic and off-shore accounts
  • Has 24/7 technical support made of experienced agents that can help you whenever you need it.
  • Has a network of banking relationships to provide multiple underwriting banks.
  • Is willing to work with a high-risk merchant like you and support you in any way you need. Moreover, the payment processor should be willing to work with businesses of any size, especially small ones and start-ups.

Final Words

As you can see there are many things to take into account when choosing your payment processor. So, don’t rush… take your time to do good research on all available payment processors, read their services and conditions carefully, read customers’ reviews, and check if they fit the features mentioned above.

While you are here, take a look at our homepage to read about our services and what we offer. Actually, get a free quote in less than 6 hours… you don’t risk anything!


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