How to Get a Merchant Account for CBD Business

Introduction 

The CBD sector has expanded dramatically since the 2018 Farm Bill allowed hemp-derived products. The CBD industry is expected to reach $47.22 billion by 2028.

However, CBD retailers continue to face substantial hurdles in finding a credit card processor willing to accept their business. Even in the United States, where most states have approved CBD products, we’ve found that numerous banks and CCPs refuse to authorize merchant accounts for CBD businesses.

Many banks consider CBD suppliers to be “high-risk,” making payment processing challenging. So, finding the best, reliable, CBD-compliant merchant solutions provider is quite important. 

And, if you are looking to find one for your business – we have curated this guide to help you choose the best merchant account and streamline your CBD business transactions. Let’s get started.

Also Read: Secure Payment Processing for CBD Ecommerce 

What is a CBD Merchant Account? 

A CBD merchant account is a type of bank account that helps CBD-related businesses accept and process electronic payments like credit cards, debit cards, internet transactions, and alternative payment systems like cryptocurrencies, SEPA, and PIX. It allows CBD-related businesses to accept and execute safe, dependable electronic payments.

The acquiring bank resolves transactions retains unsettled monies in the account, and then puts settled funds into the business bank account.

It varies from a regular merchant account in that it is designed to meet the specific needs and regulations of the CBD business. It can help you speed transactions, improve the customer experience, and generate income while being compliant with local and federal standards.

Also Read: CBD Merchant Account Vs Regular Merchant Account 

Why Get a CBD Business Merchant Account? 

Getting a merchant account for your CBD business comes with a lot of benefits and makes running your business smoother, safer, and more profitable by giving you the tools to handle payments professionally and securely.

Here’s why it’s a game-changer: 

1. Accept Online Payments Easily: A merchant account lets you take credit, debit card payments, and other online directly on your website, making it super convenient for customers to buy your products. This ease of payment often leads to more sales and happier customers. 
2. Build Credibility and Trust: When customers have the convenience of paying from their preferred payment method and you are using a reliant CBD merchant tool, it significantly boosts your business’s credibility. It shows you’re a legit, professional operation that follows industry standards, which builds trust. 
3. Boost Your Sales & Broaden Customer Base: With a merchant account, you’re not limited to just cash or checks—you can cater to everyone, including those who prefer paying by card. This flexibility helps you reach more people and grow your sales. 
4. Keep Your Finances in Check: Merchant accounts come with detailed transaction records, making it easier to keep track of your sales and manage your cash flow. It’s like having an extra set of eyes on your finances, helping you make smarter business decisions. 
5. Enhanced Security: Payment processors that specialize in CBD offer strong security features, protecting you and your customers from fraud. This extra security layer helps you run your business with peace of mind.
6. Recurring Payment Options: If you offer subscription boxes or monthly shipments, a merchant account makes it easy to set up recurring payments. This keeps customers coming back without the hassle, boosting loyalty and consistent sales.  

Also Read: Why Do CBD Business Struggle With Payment Processing

The Simple Guide to Choose the Best Merchant Account! 

To make the complex task of choosing the best merchant account platform easier to seamlessly manage your high-risk payments – we’ve complied this easy yet comprehensive step-step by guide. Let’s get going and find the right one for you. 

• Research and Identify a Suitable Payment Processor

Since not all payment processors work with CBD businesses, your first step is to research and identify a provider that specializes in high-risk industries, particularly CBD. You need to look out for CBD processors that have a proven track record in the CBD space and are familiar with the unique challenges and regulatory requirements of the industry. 

• Look after their market reputation & customer satisfaction 

When picking a credit card processor for your CBD business, it’s important to find one with experience in the CBD industry. 

An experienced merchant payment platform that understands the unique challenges of CBD businesses—like regulatory hurdles, high-risk factors, and various product types—can offer valuable support. They’ll know how to navigate compliance issues and keep your transactions smooth, making the payment process hassle-free. 

To ensure you’re choosing a reliable partner, check their reputation by reading reviews from other CBD businesses. Look for feedback that highlights their reliability, knowledge, and support, so you can feel confident you’re working with a processor that truly understands your needs. 

• Pick a Platform that can be Easily Integrated 

Nobody wants to have to migrate their e-commerce site to a completely new platform or change their existing accounting, inventory, and other tools to the new platform in order to integrate a CBD payment processor since this can be an extremely time-consuming process and discouraging.

Avoid adopting a CBD merchant processing system that forces you to use its current platform at any cost. Rather, go with a platform for merchant solutions that you can easily integrate with your platform. It facilitates the smooth integration of their CBD credit card processing system with your current set of business tools.

This integrated merchant processing platform allows you to keep track of your transactions and all business procedures in order to propel your company to new heights of success.

The ideal provider should offer pre-built connectors or APIs that are compatible with your current systems, minimizing downtime and ensuring seamless operations. 

Also Read: How to Choose the Best CBD Payment Processing Company

• Comparing The Costs Structure 

When choosing a CBD merchant account provider, it’s important to examine prices and contract terms, just like you would with any other financial service. Investigate the provider’s pricing schedule first, taking note of monthly, chargeback, and transaction fees. 

Additionally, while choosing a CBD payment processor, there are a number of other expenses to consider, including:

• Statement charges
• Compliance costs
• Non-compliance costs
• Terminal charges
• Annual or monthly costs

Before choosing the CBD merchant processing provider, be sure there are no additional fees associated with chargebacks. To minimize hidden fees, select a CBD merchant platform with a transparent and simple fee structure. 

Also Read: How Much Money is Needed to Start a CBD Business

• Check out the Merchant Solution Provider’s Policies 

Not all payment processors will demand that you execute a legally binding agreement in order to conduct business. Each company’s costs and contracts will differ, so give yourself plenty of time to decide which one is best for your CBD business.

It is best to avoid organizations that exclusively form long-term agreements, especially if they lack adequate testimonies to back up their claims. Also, if they have questionable and restrictive policies for CBD businesses. 

If a merchant solution provider catches your eye but only offers a partnership with the condition that you pay an early termination fee (ETF) if you decide to go elsewhere, be ready to negotiate.

Furthermore, pay attention to contract conditions, as duration, termination provisions, and possible penalties can differ dramatically among providers. Look for a provider who offers fair and adaptable agreements to secure the greatest long-term connection for your company.

Also Read: Merchant Account Vs Regular Merchant Account

• Customer Service & Support 

When conducting CBD-related product transactions online or offline, you must always be prepared for the worst-case situation.

For example, say a consumer wishes to lodge a $200 chargeback on a recently placed order. If so, you need to know exactly how the customer support representatives at your selected CBD payment processor will address these kinds of issues. After all, the kind of service they deliver will reflect on your business service and customer experience as well.

Ask a team member about their dispute resolution process and how fraud protection works to reduce the likelihood of problems in the first place before selecting a payment gateway.

The best option is to select a company that provides personalized customer service; if not, look for one that at least has a strong customer support staff to handle calls and emails throughout.

Also Read: Which Bank Support CBD Business

• Look after the security & compliance 

When selecting the best CBD merchant account for your business, paying close attention to security and compliance is crucial. It’s important to choose a PCI-DSS(Payment Card Industry Data Security Standards) payment processor.   

It keeps sensitive payment data safe from breaches and fraud, protecting both your business and your customers. A PCI-compliant processor uses secure data encryption, tokenization, and other advanced security measures to ensure that your customers’ credit card information is handled safely.    

This prevents unauthorized access and data theft while boosting customer confidence, knowing their personal information is protected.  

2. Ensure Full Compliance with Legal and Industry Standard

CBD businesses are subject to strict regulations and policies from the government. So, in order to get the approval for CBD merchant solutions – you need to make sure your business complies with all the legal and industry standards. 

• THC Content Compliance: According to the 2018 Farm Bill, your CBD products must contain less than 0.3% THC to be legally sold in the U.S. This THC limit is critical because exceeding it can classify your product as marijuana, which is illegal at the federal level. You also need to do the regular testing and certification by third-party labs to ensure less than 0.3 THC content in CBD products. 
• Proper Labeling and Certifications: Every CBD product you sell must have accurate labeling, including the list of ingredients, dosage instructions, and any relevant warnings. It is a legal requirement and also helps build consumer trust. 
• State Regulations: While the federal government regulates certain aspects of CBD, each state has its own set of rules and regulations. For example, some states may have stricter labeling laws, different THC limits, or additional requirements for product testing. It’s essential to stay informed about the specific regulations in each state where you plan to sell your products. 
• Product Sourcing: Payment processors will want to know where and how your CBD products are sourced. This includes details about the farms or suppliers you work with, the cultivation practices used, and whether the hemp is grown in compliance with USDA guidelines.

Also Read: CBD Business Name Ideas 

3. Submit all the Essential Documentations

Compliance is necessary and after you are compliant, it’s time to fill out the application to apply for the CBD merchant account. 

Below are all the essential documentation and details that you add to the application: 

• A Comprehensive Business Plan: A solid business plan gives an overview of how your business works, who your customers are, and how you plan to grow. This helps the payment processor understand your business’s future potential. 
• Government-Issued ID: A valid ID (like a driver’s license or passport) for business owners or signatories. 
• Business Licenses and Registration: You’ll need to show that your CBD business is legally registered and has all the necessary permits such as an LLC certificate or incorporation documents to ensure the best results.
• Bank details: You also need to give your business details to verify your business bank account details for fund deposits followed by the last three months of bank statements to show your financial health and transaction history.
• Processing History: If you’ve previously processed payments, you may need to provide statements showing your volume, chargeback rates, and transaction types. 
• Federal Employer Identification Number (EIN): Your EIN is like a Social Security number for your business. It’s used for things like opening a bank account, filing taxes, and managing payroll.

By carefully completing your application and ensuring all aspects of your business are fully compliant with legal standards, you’ll significantly improve your chances of securing a CBD merchant account.

4. Undergo the Review and Underwriting Process

Once you submit your application for a CBD merchant account, the payment processor will start a detailed review and underwriting process to assess the risk associated with your business. Here’s what they will evaluate:

• Financial Stability: The payment processor will examine your bank statements and processing history to gauge your financial health. They look at factors like your business’s revenue, expenses, and how consistently you handle transactions. This helps them determine if you can manage a merchant account responsibly.
• Chargeback Risk: High chargeback rates(when customers dispute transactions) can signal potential problems, such as issues with product quality or customer service. So, the processor will assess your chargeback history to see if you have effective measures in place to handle customer disputes and reduce chargebacks. 
• Compliance Adherence: The processor will review how well your business adheres to industry regulations and standards. They want to ensure that your products meet legal requirements and that your marketing practices are compliant with industry rules.

The review process can vary in length, typically taking from a few days to a few weeks. This timeframe depends on the complexity of your business and the completeness of your application. When needed, you should be prepared to provide additional information or clarification if requested by the processor. 

5. Maintain Compliance & Monitor Performance 

Once you’ve secured your CBD merchant account, the work is not over. To ensure consistent service and support – you need to abide by the best practices and ensure compliance. 

• Regularly Review and Update Practices: Stay informed about changes in federal and state regulations that affect CBD products to avoid account suspension and ensure smooth support.  
• Track Chargeback Rates: High chargeback rates can be a red flag for payment processors and may lead to account reviews or even suspension. So, you need to implement robust customer service practices to address and resolve issues promptly. Also, make sure to monitor your chargeback rates closely and analyze the reasons behind any disputes to prevent future occurrences. 
• Ensure Marketing Compliance: Review your marketing materials and practices regularly to ensure they comply with legal requirements.
• Maintain Best Practices: Continuously apply best practices in all areas of your business operations. This includes proper product labeling, transparent marketing, accurate record-keeping, and effective compliance measures to reduce the risk of non-compliance and maintain a positive relationship with your payment processor.

To Conclude 

A CBD merchant account is the foundation of your online payment processing solution. It enables your company to operate in this high-risk industry. 

Understanding your individual company demands and carefully selecting a reputable provider will allow you to maximize the possibilities of your CBD enterprise while assuring secure and compliant transactions. So, make the right decision for your CBD business.

While you are wondering which one to choose – you can reach out to CBD merchant solutions. We are a CBD-compliant merchant payment processor platform. Our platform ensures diverse payment options, tailored solutions, free processing, faster payouts, seamless POS and other integrations, and unrivaled fraud protection. 

Looking to find out more about our solutions? Book a free demo now & find out for yourself. Let’s get started right away.