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Getting Started with Kratom Credit Card Processing
Businesses that sell kratom often face major hurdles in accepting credit card payments. Or even…
Read More >>A reliable and effective CBD credit card payment processing system is crucial for running a successful business in the growing market of CBD products.
Studies show that 70.2% of retail purchases are made with credit cards by U.S. consumers, both in-store and online. For CBD retailers, considered a high-risk industry, this percentage is even more significant for business operations and revenue.
Navigating the high-risk world of payment processing for CBD requires a reliable partner who understands the industry’s complexities and doesn’t charge high fees, keeping your margins healthy and your business thriving.
Stay tuned as we share key considerations for choosing a CBD credit card payment processor and offer tips and strategies to help you secure better rates for your CBD business.
What Is High-Risk CBD Payment Processing?
A high-risk merchant account is designed for businesses more susceptible to chargebacks and fraud, like those in the CBD, hemp, delta-8, and THCa industries facing stricter regulations.
These accounts usually have stricter terms and higher fees due to the increased risk. However, they offer crucial CBD oil payment processing solutions that help these businesses operate smoothly and efficiently in a challenging market.
High-risk accounts often entail the following:
- Stringent scrutiny during the application process
- Higher likelihood of financial holds and reserve requirements
- Increased processing fees and chargeback rates
CBD Payment Gateway vs. Payment Processor
Understanding the difference between payment gateways and processors is important.
A payment gateway captures and transfers payment data from the customer to the acquiring bank, acting as a digital middleman to securely transmit transaction data from the customer’s bank to the merchant’s account.
On the other hand, a payment processor handles the credit card transaction process, authorizing the payment, ensuring funds are available, and facilitating the transfer of funds between the customer’s bank and the merchant’s account.
CBD retailers will need both, and FTx POS provides solutions for both areas.
Why a CBD Payment Processor Is Necessary
The CBD industry needs specialized CBD credit card payment processing due to its unique challenges.
Traditional processors might shy away from it due to perceived legal and financial risks, leaving you stuck without reliable payment solutions.
However, a dedicated CBD payment processor understands the industry’s specifics, ensures compliance with regulatory standards, protects against chargebacks, and provides stability for your transactions. By partnering with a CBD-focused merchant services provider, you can safeguard your business, streamline your operations, and focus on growth without worrying about payment hurdles.
Get Started. Choose a CBD payment processor. FTx POS offers integrated payment processing with no high-risk fees for CBD retailers. Get a rate quote today!
Do You Need a CBD Merchant Account?
A merchant account is basically a bank account for your business transactions, holding funds from credit card sales before they are transferred to your regular business account. It acts as an intermediary, ensuring that the funds from customer transactions are processed correctly and securely.
Although some payment processors might not require a merchant account, having a specialized CBD merchant account can help ensure smoother financial operations, particularly for businesses dealing with CBD products.
This is because CBD-related businesses often face higher scrutiny and regulatory challenges. A dedicated CBD merchant account can provide the necessary support and compliance measures to navigate these complexities effectively.
Why Traditional Processors Fall Short
The issue with traditional processors is their lack of understanding of CBD retailers’ needs. Often, businesses are dropped without warning, funds are frozen without explanation, and there’s a constant threat of non-compliance.
Reasons to reconsider using a traditional merchant processor:
1. Lack of Industry-Specific Knowledge and Support: Traditional merchant processors often don’t have the specialized expertise to understand the unique challenges and requirements of different industries, leading to poor support and service.
2. Sudden and Random Account Closures: Traditional processors can close accounts without warning, causing major disruptions to business operations and cash flow, which can be very harmful.
3. Unexpected Fund Holds Due to Compliance Concerns: Traditional processors might hold funds unexpectedly due to compliance issues, creating financial strain and uncertainty for businesses that need a steady cash flow to manage daily operations.
High-Risk CBD Payment Processing: What to Expect
High-risk accounts come with their own set of rules, which could include:
- Higher Transaction Fees: Often a result of the added risk taken on by the processor.
- Reserve Accounts: A percentage of each sale might be held to cover potential chargebacks.
- Payout Cycles: High-risk accounts can sometimes experience delays in fund transfers.
- Strict Underwriting: More extensive background checks and business evaluations.
- Higher Chargeback Rates: Possibly due to the industry’s higher occurrence of transaction disputes.
Tips for Lowering CBD Credit Card Processing Rates
High-risk processing rates are typically higher due to the increased risk of fraud and chargebacks associated with certain types of businesses. However, these rates are not set in stone and can be negotiated with payment processors.
It’s common to find a difference in fees between traditional and high-risk retail processing.
Traditional Retail Processing Rates:
- Typically range from 1.5% to 3.5% per transaction.
High-Risk Processing Rates:
- Typically range from 3.49% to 3.95% per transaction.
- Generally higher because of the increased risk of fraud and chargebacks.
- Usually 0.5% to 1% higher than low-risk rates.
Here’s how to obtain better rates for CBD payment processing:
- Use market research to improve your negotiations by understanding industry trends and competitor benchmarks.
- Expand your search to include different processors and explore various options to find the best fit for your needs.
- Demonstrate a solid track record of success, including low chargeback rates and customer-friendly return policies.
- Stay updated with regulatory changes to ensure your practices are compliant.
- Use strong financial statements to show your financial stability and attract potential partners or investors.
CBD Merchant Processing with FTx POS
FTx POS offers comprehensive solutions for CBD merchants, whether you need POS integrated payment processing or third-party services.
Here are some benefits of working with FTx POS for CBD payment processing:
- Competitive Rates: We offer some of the most competitive rates in the industry, ensuring you get the best value.
- Quick Payout Cycles: Enjoy fast and reliable payout cycles, so you can access your funds promptly.
- Rate Match Guarantee: We guarantee to match any lower rate you find, giving you peace of mind.
- Protection Against Chargebacks: Our robust system provides protection against chargebacks, minimizing your financial risk.
- Integrated Ecommerce Solutions: Benefit from our fully integrated ecommerce solutions that simplify your online business operations.
Interested in FTx Card Payments for CBD credit card processing? Contact us today to schedule a consultation and see a demo!
Interested in FTx Card Payments for CBD credit card processing? Contact us today to schedule a consultation and see a demo! Learn more about our Credit Card Payment Processing Solution.
FAQs
While there are no specific federal regulations on processing CBD transactions, some processors may have their own guidelines or restrictions. It's important to thoroughly review these before choosing a processor to ensure you can comply with their policies.
It's important to note that hemp-derived CBD products (with less than 0.3% THC) are federally legal but still illegal in some states, thanks to the 2018 Farm Bill.
Due to the legal complexities surrounding the sale of CBD products, many traditional payment processors are hesitant to work with businesses in this industry. This is because hemp-derived products are still considered federally illegal by the United States government, even though they may be legal in some states.
The best way to find a reliable payment processor for your CBD business is to do thorough research and reach out to different companies that specialize in high-risk industries. It's also important to make sure the processor has experience working with CBD businesses and understands the unique challenges they may face.
If your payment processor terminates your account, it’s important to act quickly to avoid significant disruptions to your business.
First, try to get a clear understanding of why the termination occurred by contacting the processor directly. This can help you address any issues or misunderstandings.
Next, start researching alternative payment processors immediately, focusing on those that specialize in high-risk industries like CBD.
Also, think about adding more payment options like ACH (Automated Clearing House Payments) payments, e-checks, or cryptocurrencies. These can act as backups if any issues come up in the future.
To avoid common pitfalls in CBD credit card processing, thorough due diligence is key.
- First, work with a payment processor that understands the CBD industry and its risks.
- Keep meticulous records and maintain transparency in all transactions to reduce chargebacks and fraud.
- Implement strong fraud prevention measures like address verification (AVS) and CVV checks.
- Stay updated on industry regulations to ensure compliance with federal and state laws.
- Building strong relationships with your payment processor and keeping communication open can help resolve issues quickly.
