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Merchant Services for CBD: Everything You Want to Know!

Being a CBD merchant is perfectly legal in the United States. (As as long as it doesn’t contain more than 0.3 percent THC.) Still, the stakes are high for CBD businesses. Many banks consider CBD sellers “high-risk,” making merchant services — like simple credit card processing — a struggle. It doesn’t have to be. In this guide, learn the problems associated with high-risk merchant accounts and the mistakes other CBD sellers so often make.

Why is CBD Merchant Processing Considered High-Risk?

Due to the stringent (and ever-changing) legal restrictions on CBD and hemp products, CBD businesses have difficulty obtaining merchant services that other online retailers use to facilitate payments and expedite orders. As a CBD seller, you have every right to open a merchant account for your business. However, you might encounter the following problems:

    • Higher-than-average transaction rates
    • Rolling reserves
    • Unexpected holds on funds

This makes running your CBD business difficult, especially in the current climate. To make matters worse, there have been reports of major banks “purging” CBD merchants from their portfolios.

This is why you need the right managed risk merchant services provider for your CBD business.

How Do I Establish a CBD Merchant Account?

The basics of opening a CBD merchant account aren’t that different from setting up other types of e-commerce. The main challenge is finding a processor who will be willing to provide a merchant ID (MID) for CBD. With LOLA POS, expect the following:

      • Submit an application
      • Prove your identity
      • Provide documentation about your product including test results and evidence of quality
      • Once accepted, start processing credit card payments online/in-store

Can’t I Just Call My Business Something Else?

Because it’s so difficult to get a standard merchant account (MID) for CBD, many CBD merchants sign up with large payment platforms such as Square or Paypal, and just call their business something else, hoping to “fly under the radar” and not get caught. There are thousands of CBD businesses today that are registered with mainstream payment processors as “health and wellness” or “nutritional supplements”, etc.

This may be tempting, but it’s a bad idea.

First of all, it’s actually fraud, and can risk not only account termination but legal consequences as well, depending on the specifics of the situation.

But even more important: You started your business because you want it to GROW. It’s inevitable that if your business does scale up, it will be reviewed and if you’ve mis-represented what you sell to the payment processor, you will be terminated – at the worst possible time, because this will stop your business in its tracks just when it’s starting to succeed.

This can lead to thousands of dollars in lost revenue, as well as wasted advertising and marketing dollars. Many small businesses have gone bankrupt due to termination of their processing right at the point where they are beginning to scale. Don’t be one of them – get a proper CBD MID from LOLA POS and protect the future of your business.

How Does Being “High Risk” Affect Your Chances of Opening a Merchant Account?

Because of the nature — and the relative newness — of the CBD sector, few banks will understand your business. Many institutions refuse services to CBD sellers because they fear legal repercussions. (Even though selling CBD is perfectly legal, and the sector was worth around $620 million in 2018 alone!) As a result, you might…

        • Face further identification/financial checks
        • Experience long application waits
        • Have your application rejected
        • Have existing accounts closed

This makes it difficult to sell your products online/in-store.

Did Your Credit Card Processor Shut Down Your CBD Merchant Account?

Perhaps you already opened a merchant account for your CBD business. Things probably went OK for a while, until your provider shut down the account. Unfortunately, this happens all the time. As a result, many CBD sellers have to cease selling until they find alternative merchant services. If you’re in this situation, we can help – contact us today!

Legal Issues in the CBD Oil Sector

Many traditional banks fail to distinguish between CBD and THC. Because there are few guidelines (and lots of misinformation about this topic) in the finance industry. Banks often close merchant accounts without a moment’s notice — or refuse to open new accounts. They just consider CBD businesses “too risky.”

While this might change in the future — credit card processing for CBD products is still evolving — CBD sellers should open accounts with providers that cater to their industry (and other businesses considered “high-risk”). This achieves the following:

        • Avoids account closure
        • Avoids unnecessary identity/financial checks
        • Facilitates day-to-day business tasks
        • Makes it possible to scale your business

The Future of CBD Merchants

The CBD industry is booming.
One in 7 American adults uses CBD products.
Experts predict CBD product sales will total $23.7 billion by the year 2023.

And it’s just getting started:

“Ever-increasing awareness of the benefits of CBD will lead to an upsurge in the demand for CBD oil in beverages and food,” says Yahoo Finance. “This growing cognizance is expected to help propel the industry forward.”

To facilitate business growth, CBD retailers need a reliable, secure payment processing system.

Benefits of Opening a CBD Merchant Account

There are many benefits of opening a CBD merchant account. These include:

        • Accept multiple payment types online/in-store, including credit card payments
        • Handle returns/refunds/partial refunds
        • Safer than just accepting cash
        • Better money management

What Makes A Good High-Risk Merchant Account Provider?

CBD might be considered a “high-risk” business by some banks, but you shouldn’t have to pay a premium for the merchant services you are entitled to. The best account providers…

        • Don’t charge exorbitant fees
        • Provide you with the safety/security features you need
        • Have high acceptance rates
        • Provide excellent customer service

What To Look For in a CBD Payment Processing Gateway

Not all CBD payment processing gateways are the same. You need the services of high-risk payments experts that:

        • Handle credit card payments quickly and safely
        • Issue returns/refunds/partial refunds promptly
        • Improve the customer experience online/in-store

What Are the Fees Associated With CBD Merchant Accounts?

The cost for a CBD merchant account is similar to other e-commerce businesses, though rates can be a bit higher due to the added overhead of industry regulations.

Looking for high-risk merchant services for CBD? Contact us today to learn more about our merchant accounts that streamline payments and support your business. We Work For You.®

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