The 5 Best Marijuana Credit Card Processing Companies For Dispensaries
Marijuana use in the United States has come a long way since the days of Reefer Madness. As of April 2021, the medicinal use of marijuana is now legal in 36 states and four US territories. Fifteen states have gone even further, allowing the recreational use of marijuana by adults. As of this writing, there is every reason to expect that the number of jurisdictions allowing medical and recreational use of marijuana will continue to expand in the coming years.
At the same time, marijuana is still listed as a Schedule I drug by the Food & Drug Administration (FDA), rendering its possession or use for any purpose illegal under federal law. Although the federal government no longer goes to great lengths to prosecute violators of this law, there is also no urgent push to change the legal status of marijuana or other cannabis-derived products.
In some jurisdictions, the quasi-legal status of marijuana makes it extremely risky for payment processors to deal with, putting marijuana dispensaries firmly in the high-risk category. In fact, marijuana sales are so risky that even many high-risk specialists won’t touch them. If you want to be able to accept anything other than cash-only sales, you’ll learn that it’s quite challenging to find a provider that can accept your business — and won’t rip you off with exorbitantly high rates and fees. Fortunately, we’ve found six reputable providers that specialize in serving high-risk businesses and accept cannabis dispensaries.
One word of caution: The fact that a provider works with the cannabis industry does not guarantee it will accept your business. High-volume, retail-only dispensaries with a proven track record will generally have an easier time getting approved for an account. Conversely, startups and eCommerce dispensaries will have a much harder time finding a provider that’s willing to approve them for a merchant account.
It’s also important to understand that we do not dispense legal advice, and covering all the complex requirements of state laws regarding cannabis sales is far beyond the scope of this article. While we can give you some good recommendations for specific marijuana merchant account providers to check out, you’ll want to consult with a local expert (preferably an attorney with experience in this area) for advice on keeping your business in compliance with all applicable laws.
Read more below to learn why we chose these options.
Table of Contents
- Why Accept Credit Cards For A Marijuana Dispensary?
- 6 Best Merchant Accounts For Cannabis Credit Card Processing
- Looking For One Of These Marijuana Merchant Accounts?
- Why Cannabis Credit Card Processing Is Considered High Risk
- What You Should Look For In A Marijuana Credit Card Processing Service
- Which Marijuana Payment Solution Is Right For My Dispensary?
- In Summary: 6 Best Merchant Accounts For Cannabis Credit Card Processing
Why Accept Credit Cards For A Marijuana Dispensary?
Because getting a merchant account can be so challenging and expensive, many dispensaries don’t get one, choosing to rely on cash-only sales instead. However, there are significant advantages to being able to accept credit cards that make the aggravation worth it. The most obvious advantage is that your overall sales volume will go up. Many customers no longer carry significant amounts of cash with them, meaning that you can lose a lot of sales if you don’t accept credit card payments.
Accepting credit cards can also enhance how your customers perceive your business. You’ll appear more trustworthy than a dispensary that only accepts cash payments. While being perceived as a “legitimate” business isn’t normally a problem for most retailers, marijuana dispensaries inevitably have more challenges in this area because they’re selling a product that is still illegal under federal law. Anything that adds to an appearance of normalcy will help your customers feel more comfortable doing business with you.
Also, operating on a cash-only basis is simply not an option if you want to sell your products online. You’ll absolutely need a merchant account or an ACH processing service to accept any online purchases. While the ongoing COVID-19 pandemic has identified a clear need for eCommerce cannabis sales, pick-up and local deliveries are the only options at this time since it’s still highly illegal to ship cannabis through the mail — even within states that have legalized these products.
6 Best Merchant Accounts For Cannabis Credit Card Processing
A cannabis merchant account is simply a merchant account that allows you to accept credit card payments but has been approved by your provider for selling cannabis products. Due to the dramatically higher risk associated with these goods, cannabis merchant accounts will always come with higher rates and fees and more restrictive policies than low-risk accounts.
Here’s a brief overview of six of the best merchant account providers for cannabis credit card processing:
PaymentCloud has been providing high-risk merchant accounts since 2010. The company now accepts CBD businesses and is a good option to consider for medical marijuana dispensaries. PaymentCloud has a very high success rate at getting merchants approved for an account and — unlike most high-risk providers — doesn’t charge an application or account setup fee.
Like most high-risk specialists, PaymentCloud utilizes a quote-based pricing system and doesn’t disclose any standardized processing rates or account fees. For cannabis sales, you can expect some sort of flat-rate pricing quote, plus the usual assortment of recurring and incidental fees. The company offers Authorize.Net as its payment gateway, although its system is compatible with other third-party gateways as well. Additionally, it provides a free virtual terminal with each account.
While we don’t have very much specific information on what PaymentCloud has to offer for cannabis businesses, it has an excellent online reputation and provides top-notch customer service to its merchants. It’s definitely worth checking out in your search for a merchant account for your dispensary.
- No application or account setup fees
- Excellent online reputation
- Dedicated account manager for customer support
- May require an offshore account
- No online knowledgebase
eMerchantBroker is one of the most well-known providers in the high-risk processing industry. The company accepts a wide variety of high-risk industries and has recently begun accepting medical marijuana dispensaries. However, like many providers, it doesn’t specifically advertise this feature, so you’ll have to contact the sales team to discuss your options.
While eMerchantBroker offers a wide range of products and services for retail and eCommerce businesses, the company has a reputation for being more expensive overall than most of its competitors. You’ll probably have to accept a long-term contract with an expensive early termination fee, also. Nonetheless, eMerchantBroker has a good reputation for good customer support after the sale, and this feature alone makes it worth your consideration.
eMerchantBroker normally uses tiered pricing exclusively, which we ordinarily do not like due to its high cost and lack of transparency. However, as we’ll discuss later on, most cannabis processors have settled on a simple flat-rate pricing plan to deal with some of the unique challenges that this industry presents, and you’ll probably be offered a flat-rate quote.
- Accepts medical marijuana dispensaries
- Offers a full range of products and services
- Uses domestic and offshore accounts
- Very high acceptance rate
- Higher-than-average rates and fees
- Long-term contracts with early termination fees
Not Yet Rated
Instabill is another veteran high-risk provider that provides medical marijuana credit card processing. Unlike many of the other providers we’ve profiled, the company is very transparent about accepting cannabis merchants. You’ll find some fairly detailed disclosures on the Instabill website that describe the payment options available for both medical and recreational marijuana sales.
The company currently offers two payment options: (1) a debit solution, where you issue cards that your customers can link to their bank accounts to allow ACH payments, and (2) a cryptocurrency solution, where customers pay with Bitcoin or some other digital currency. Neither of these methods is without risk or significant limitations, but either one will elevate your business above operating on a cash-only basis. Note that neither of these options includes the ability to accept traditional credit cards, such as Visa or Mastercard.
Getting approved for a cannabis merchant processing account with Instabill will require four to six months of previous processing history, which could be a real challenge in this industry. Account approval requires anywhere from 10 business days to two weeks. Also, only offshore merchant accounts are available at this time.
- Offers “debit” (actually ACH) processing option
- Offers cryptocurrency option
- Reputable company with a proven track record
- Does not accept startups
- Offers offshore accounts only
- Typically requires a six-month rolling reserve
4. Shift Processing
Shift Processing is a small merchant services provider specializing in offering surcharging and cash discounting programs to help merchants save money on their credit card processing costs. The company serves both low and high-risk industries and supports cannabis merchants in states where marijuana has been legalized for medicinal or recreational use.
Shift uses a Peer-to-Peer (P2P) payment processing solution that’s similar to Venmo, allowing customers to use traditional credit cards but without the transaction going through the credit card networks. All transactions are routed through domestic (US) banks, so you won’t have to worry about the risks that arise with using an offshore account. While we’re not entirely sure how this solution actually works, we suspect that it involves some creative re-classifying of the products being sold (e.g., flowers instead of cannabis, dietary supplements instead of edibles, etc.)
So what’s the catch? The main limitation of Shift Processing’s service is that it’s limited to in-person retail and pick-up orders only. eCommerce sales are not supported. Also, be aware that the company’s so-called “zero-fee” processing option probably won’t cover 100% of your processing costs. Surcharges and cash discounts cannot exceed 4%, whereas the average rate for marijuana payment processing is nearly 6%. Nonetheless, it’s a good option to consider, especially considering the limited number of choices currently available to cannabis merchants.
- Allows customers to pay with traditional credit cards
- Uses Point-to-Point (P2P) solution similar to Venmo
- Does not use offshore bank accounts
- Supports cash discounting programs
- No eCommerce support
- Cash discounting may not cover 100% of transaction processing costs
5. SMB Global
SMB Global is a high-risk specialist that spun off from one of our favorite providers, Payline Data, in 2016. The company specializes in providing merchant accounts to high-risk and offshore businesses. Using various back-end processors, SMB Global can approve a merchant account for almost any high-risk business. The company doesn’t advertise support for cannabis merchants but does work with CBD businesses and is thus worth checking out if you’re running a dispensary.
Because it works with so many banks and processors to get you approved for an account, SMB Global doesn’t offer any specific pricing information. Processing rates, account fees, and contract terms will vary widely depending on which back-end processor handles your account. You should also expect having to accept a standard three-year contract with an automatic renewal clause and an early termination fee. Likewise, rolling reserves are virtually guaranteed to be included in your account agreement.
SMB Global requires a minimum processing volume of $50,000 per month for an offshore merchant account. This requirement will almost certainly apply to cannabis businesses due to the lack of support for the industry among domestic banks and processors. The company will occasionally waive this requirement if your business has a very strong financial history.
- Accepts cannabis dispensaries through offshore merchant accounts
- Reasonable pricing and contract terms
- Excellent customer service
- Requires a minimum $50,000 monthly processing volume for offshore accounts
- No mobile processing system at this time
Looking For One Of These Marijuana Merchant Accounts?
While many merchant services providers support high-risk industries, not all of them are willing to take on a cannabis dispensary as a customer. The vendors below — while good companies in their own right — either don’t accept cannabis merchants or don’t have a sufficient track record to warrant a recommendation at this time.
Host Merchant Services
Host Merchant Services is one of our favorite providers that cater to both low and high-risk businesses. However, the company has some pretty strict limits on which types of high-risk businesses it will accept, and cannabis merchants appear to be excluded at this time.
Alaska-based Naturepay is a small provider that specializes in serving the cannabis industry. The company offers month-to-month billing and advertises a flat 5.95% + $0.30 per transaction fee for credit card processing. Like Shift Processing, it claims to allow Visa and Mastercard transactions without the need to resort to an offshore merchant account. However, Naturepay is such a new company that it doesn’t have the kind of proven track record we like to see when recommending the “best” providers for a given industry. It’s still worth checking out, particularly if you’re having difficulty getting approved for an account elsewhere.
The question inevitably comes up: Why not just use Square? The company is extremely popular with small business owners, offering predictable flat-rate pricing and month-to-month billing. Unfortunately, it doesn’t accept cannabis merchants at this time. Although the company has recently launched a trial program for CBD businesses, the additional risks and legal complexities associated with marijuana sales make it a no-go at this time. Using Square to process cannabis sales explicitly violates the company’s Terms of Service, and you will get shut down when (not if) the company figures out what you’re really selling.
Why Cannabis Credit Card Processing Is Considered High Risk
Besides the obvious legal issues affecting marijuana sales (which we’ll discuss in more detail below), several other factors place cannabis dispensaries firmly in the high-risk category.
Being labeled as high-risk means that it’s much more difficult to get approved for a merchant account, as relatively few providers are willing to accept high-risk businesses. Processing rates, account fees, and contract terms will be more expensive and restrictive than those for a comparable low-risk business. However, you can still get reasonable terms and pricing if you go with a reputable high-risk specialist.
Factors that add to the risk of accepting cannabis merchants include (1) high chargeback rates, (2) the lack of a Merchant Category Code (MCC) for cannabis sales, and (3) lack of FDA approval of cannabis products for medicinal purposes.
Chargebacks are a known risk for just about any type of business, but the chance of experiencing one is much higher with cannabis products. While there are many reasons why a customer might decide to file a chargeback, the perceived lack of medical effectiveness of cannabis products is one of the most probable. For example, a customer might purchase medical marijuana from a dispensary to treat anxiety. If they feel that the product doesn’t work for them but can no longer return it, they might resort to filing a chargeback to get their money back.
Because it’s currently illegal to sell cannabis products under federal law, there are no Merchant Category Codes (MCCs) available for them. Dispensaries often resort to using the MCCs for general merchandise or flower shops, having no other accurate options available. Discrepancies between the MCC used and the actual product sold is one of the most common ways to get your merchant account shut down by your processor. That’s why it’s important to select a cannabis-friendly provider that understands your situation and is willing to allow you to use this workaround.
Like many products in the nutraceutical category, the purported medicinal benefits of cannabis products have not been approved or validated by the Food & Drug Administration (FDA). With little or no peer-reviewed research currently available to evaluate the benefits of medical marijuana use, there is some leeway for cannabis advocates to tout their products as a potential cure for just about anything. Although there is a general acceptance of the effectiveness of marijuana in alleviating chronic pain, its use for other conditions (such as depression and anxiety) is still open to debate.
While these issues are all problematic, the shaky legal status of cannabis due to conflicting federal and state laws is the single largest factor keeping the payments processing industry from embracing these products. Here’s a brief overview of the current legal status of marijuana products:
Legal Issues With Marijuana Payment Processing
The first and most important thing to know about the current state of marijuana law in the United States is that cannabis products (defined as having 0.3% or more of tetrahydrocannabinol (THC)) are still listed as Schedule I drugs by the FDA. Under federal law, it’s illegal to possess, use, or distribute these products — period. Also, the Supremacy Clause of the US Constitution (Article VI, Paragraph 2) explicitly states that federal law will take precedence over conflicting state law.
While you can still register a marijuana dispensary and obtain a business license to operate in a state that has legalized cannabis products, your bank and credit card processor have to comply with federal law. Credit card associations must operate under the same constraints, which is why Visa and Mastercard have policies stating that they won’t allow their cards to be used for cannabis purchases. (It’s unknown how they would be able to determine this since they don’t publish a merchant category code that would truthfully identify the product.)
Another serious legal issue is that it’s still a felony under federal law to ship Schedule I drugs (including marijuana) through the US Postal Service, even within a state where marijuana use is legal. Likewise, private carriers (such as FedEx and UPS) won’t violate the law by shipping your cannabis products. These restrictions severely limit eCommerce sales. While you can process marijuana sales over the internet, you’ll effectively be limited to pick-up and courier-delivered orders.
Although the number of states allowing the legal use of cannabis for medicinal and recreational use is growing all the time, none of these issues will be resolved until a change in the law is made at the federal level. While we believe that this will eventually happen, there’s no indication that it will occur anytime soon.
What You Should Look For In A Marijuana Credit Card Processing Service
With a few notable exceptions, finding a good marijuana credit card processing provider for your cannabis business involves the same criteria as finding a good low-risk provider. It’s just much harder to find a provider that offers the right combination of reasonable prices, fair contract terms, and high-quality customer service. Here are the most important considerations:
- Accepts Cannabis Dispensaries: You’ll need to confine your search to providers that are actually willing to provide credit card processing services for cannabis merchants. Unfortunately, the majority of providers — including many high-risk specialists — don’t accept cannabis businesses at all due to the legal issues we’ve discussed above. Another complication is that some providers will accept cannabis merchants but don’t explicitly advertise this fact. You’ll have to call around and get a straight answer from a company’s sales team before considering them any further. Also, note that providers that do accept dispensaries might have their own restrictions as well. For example, a company might accept a medical marijuana clinic but not allow recreational sales.
- Account Approval: The underwriting process required to get approved for a merchant account can be tedious for any merchant, but it’s particularly difficult if you sell cannabis products. Nonetheless, completing underwriting before you start processing credit card sales can save you from having your account suddenly shut down once you’ve started using it. You should be skeptical of providers offering “instant” approval of your merchant account, as they often defer this critical step until after you’ve already signed a long-term contract.
- Pricing: The bottom line here is that any high-risk cannabis merchant account is going to cost significantly more than a comparable low-risk one. While high-risk providers typically use the expensive tiered pricing model, cannabis merchant accounts usually use a flat-rate plan instead. Currently, the average rate for cannabis processing is 5.95% + $0.30 per transaction for retail (i.e., card-present) sales. You can also expect to be charged higher monthly and annual fees as well, although the difference in these costs isn’t as much as it is with processing rates. Another additional “expense” that most high-risk merchants have to contend with is a rolling reserve. That’s where your processor withholds a certain percentage of your funds every month until the reserve is met. While you’ll eventually receive all your money, rolling reserves can create serious cash flow problems for a small or newly-established business.
- Contracts: We prefer month-to-month billing arrangements that don’t lock you into a long-term contract or force you to pay an early termination fee (ETF) if you close your account early. However, cannabis merchants will usually have to accept both a long-term contract (typically for three years) and an ETF. Be aware that almost all long-term contracts include an automatic renewal clause that extends your contract, typically for one-year periods at a time.
- Processing Hardware: Since you’ll be selling cannabis products out of a retail location, you’ll need either a dedicated countertop credit card terminal or a mobile processing system that uses your smartphone or tablet in conjunction with a mobile card reader. Your terminal should be able to accept EMV payments at a minimum and preferably NFC-based (“contactless”) methods as well. For some specific recommendations, check out our article, The Best Credit Card Machines & Terminals. We also highly recommend that you purchase your terminals outright rather than leasing your equipment. Leasing arrangements lock you into noncancelable long-term contracts, and you’ll wind up paying several times more in leasing fees than what your machine is worth. One unique aspect of cannabis processing is the use of “cashless” ATMs that allow your customers to make withdrawals from their bank accounts via ACH transfers. Unfortunately, these devices are usually only available through a leasing arrangement. Check your contract very carefully to determine the total cost over the full length of the lease, rather than focusing solely on the monthly lease payment amount.
- Customer Support: In researching dozens of merchant account providers, we’ve found that high-quality customer service is the real secret ingredient that separates the merely average providers from the truly outstanding ones. Customer support issues occur more frequently with cannabis and other high-risk merchants, so you’ll want to pay particular attention to a provider’s reputation in this area.
Which Marijuana Payment Solution Is Right For My Dispensary?
Although we’ve given you six recommendations to start you on your search for marijuana payment solutions for your cannabis business, there isn’t any single company that’s the “best” — or even the most affordable. You’ll want to find a provider that offers the best fit with how you want to run your business. Keep in mind the following considerations when narrowing down your search:
- Your processor should offer a clear disclosure of how your transactions will be processed. Cannabis transactions inevitably involve some “creative” strategies to accept payments that aren’t common in other industries. Cashless ATMs, ACH-only processing, and the use of offshore accounts are just some of the possibilities. Make sure you have a complete understanding of how these services work and the risks involved.
- Look for transparent pricing, with processing rates that are at or close to the industry average. While these will be much higher than rates for a low-risk business, they should still be reasonable. Surcharging or cash discounting programs can help to offset some of these costs.
- Account fees should also be reasonable. These should be fully disclosed and understood before you agree to sign up. Thoroughly reading your contract is your best defense against getting hit with “hidden” fees later on.
- Finally, look for a company with a reputation for good customer support. This won’t be easy, as the entire payments processing industry is notorious for doing poorly in this area. However, we’ve found that smaller providers can often outperform the larger companies in the industry in this area.
If you’re just getting started in the marijuana industry, you’ll have a lot of concerns beyond finding a good cannabis payments processor. Getting the funds to launch your business can also be a daunting challenge. Check out our article, How To Finance A Medical Marijuana Dispensary, for some helpful tips and suggestions. Good luck!
In Summary: 6 Best Merchant Accounts For Cannabis Credit Card Processing
- No application or account setup fees
- Excellent customer support
- May require an offshore account
- Accepts medical marijuana dispensaries
- Offshore accounts available
- Openly accepts cannabis merchants
- Offers "cashless" ATM & cryptocurrency payments
- Offshore accounts only
- Shift Processing:
- Accepts credit card payments
- No offshore accounts
- Support for cash discounting
- SMB Global:
- Uses offshore merchant accounts
- Minimum $50,000 per month processing volume
- No mPOS option