As CBD becomes more popular, more and more people are looking to buy it online. But one obstacle that CBD businesses face is finding payment processors that are willing to work with them. To help, we put together a list of the best CBD-friendly payment processors out there.
Products derived from hemp, including CBD oil, are federally legal in the United States as long as they contain 0.3% or less THC. However, the legality of CBD in many states is still murky and many banks and payment processors are reluctant to work with CBD businesses because of the potential risks involved. This has led to significant challenges for CBD merchants in finding a merchant account that will allow them to process debit and credit card sales.
Cannabidiol (or CBD) is a substance derived from hemp plants. Marijuana is also derived from hemp plants, but it contains a higher concentration of THC, the psychoactive compound that gets people “high.” CBD, unlike marijuana, contains little or no THC, and so it does not produce any intoxicating effects. Despite this rather obvious difference between the two, CBD was illegal under federal law until the 2018 Farm Bill was passed.
Despite its federal legal status, laws governing CBD use and sales vary widely from state to state. Nearly all states allow for the purchase or sale of hemp-derived CBD products providing they contain less than 0.3% THC, however, each state has its own unique regulations.
Because of the ever-changing legal landscape, many banks and payment processors are reluctant to work with CBD merchants. Many CBD businesses have seen their accounts suddenly closed without prior notice.
What is a CBD Merchant Account?
A CBD merchant account is a merchant account that has been specifically approved fro use in processing payments relating to the sale of CBD products. CBD businesses are classified as high-risk, so most of the popular merchant account providers are not willing to work with CBD based businesses.
Why does a CBD Retailer Need a High-Risk Merchant Account?
The merchant services industry, due to the complex legal situation of CBD products, has decided that businesses selling CBD are “high-risk.” One of the main reasons for this is the potential for chargebacks. There are 3 primary factors putting CBD businesses into the high-risk category:
- The lack of a uniform legal status of CBD products from state to state.
- Unsubstantiated claims about the efficacy of the products.
- High chargeback rates.
The banks who support merchant accounts do not have an appetite for handling businesses that sell a product in a murky legal status. Until CBD laws are uniform across all 50 states, there are a number of potential legal pitfalls merchants have to be careful to avoid.
The Food & Drug Administration (FDA) has not approved CBD as a treatment for any condition. There currently is little to no peer-reviewed research available about the benefits of CBD use (although many studies are being conducted). Because of this, many retailers make unsubstantiated claims about the efficacy of their products. You can find claims stating that CBD will cure depression, anxiety, alleviate pain, and relieve insomnia, among a host of other ailments.
These claims often result in refunds and chargebacks.
Chargebacks happen with any business, but the chance of them happening with CBD products is much greater because of the unsubstantiated claims mentioned above made by many retailers.
The Best CBD Merchant Services Providers
CBD merchant providers are simply companies that provide merchant accounts which are specifically approved to sell CBD based products. Due to the higher risk associated with CBD products, CBD merchant accounts include a higher price tag and sometimes a few more restrictions than the typical low-risk account.
Nevertheless, if you want to be able to accept debit and credit card payment for your ecommerce store, you are going to need a merchant account to do so. These are some of the most CBD friendly merchant account providers.
Square
Square is one of the most recognized names in the industry, becoming extremely popular for low-risk businesses and startups due to their easy onboarding and free card swipers. They have also been offering services for CBD merchants since 2019. As expected, their transaction rates are higher than their low-risk rates, but they do not hit you with traditional account fees.
All of Square’s pricing is fully disclosed on their website.
One thing to note is that Square charges the same rate for credit and debit cards, which means you are paying a higher rate for PIN debit transactions. If you are not processing payments in person, in other words you do not have a physical store to go along with the online component of your business, that is really not a concern.
PaymentCloud
PaymentCloud has a long history of providing high-risk merchant accounts going back to 2010. Unlike most high-risk providers, there is no application or account setup fee with PaymentCloud.
You will not find any prices disclosed on their website as PaymentCloud provides pricing on a per-quote basis, which, although frustrating, is a pretty standard practice in the high-risk sector of the industry.
PaymentCloud offers Authorize.Net as its payment gateway, but is also compatible with other gateways as well.
Before applying for an account with them, it is important to note that PaymentCloud currently is only providing accounts for CBD merchants selling products that are applied topically. Anything that is ingestible such as gummies, cookies, or even dog treats are currently prohibited.
Easy Pay Direct
Easy Pay Direct has been providing high-risk merchant account for about a decade and now accepts CBD retailers as well. Something to keep in mind is that Easy Pay Direct is not particularly startup friendly. They will work with some startups, but they need to be ones with prior experience in the industry or a significant financial backing. Both is even more ideal.
Easy Pay Direct offers no monthly minimums, no early termination fee, and competitive pricing. Unlike PaymentCloud, they do accept merchants selling ingestible products.
Looking for Help Fulfilling Your CBD Orders?
If you are looking for a CBD-friendly fulfillment partner to help you with warehousing and shipping your products, look no further than ShipBuddies. Learn more about our CBD order fulfillment services and request a free quote today.
