Introduction
Accepting the credit card payments are not an option right now. It is a necessity. If you are not adapting, then you are losing out on your potential customers.
So, in order to accept credit card payments – you need to get a merchant account. But, here’s the catch – getting a normal merchant account and getting a CBD merchant account is different.
To get merchant account for your CBD business – you need to take a step further and get a high-risk merchant account that is compliant for the CBD businesses and can offer best-in-class services.
If you are still confused on what are the difference between normal merchant account vs CBD merchant account and how to get the right one for your business then this blog is all you need.
Let’s get started.
What is a CBD Merchant Account?
When a consumer wants to pay with a credit card after making an online purchase from a merchant’s website, the merchant payment account allows firms to accept the card information and carry out the required validations and checks.
So, it ensure seamless & secure credit card transactions, it is important to have a trusted CBD merchant account provider.
However, because most standard providers are reluctant to get involved with high-risk businesses like CBD and because there are numerous regulatory procedures that must be followed, a CBD firm needs a CBD-specific high-risk merchant payment account.
Therefore, it is crucial for CBD companies to find a specialized merchant account provider that can provide dependable, fast, and trustworthy payment processing solutions in this industry.
Why it is Important for CBD Businesses to Partner with a CBD Compliant Merchant Account Provider?
For many years, cannabidiol, or CBD, was classified as an illegal Schedule I drug that was prohibited from being sold in any store or even online. The CBD is classified as “high-risk” throughout its entirety.
But in 2018, when President Trump signed the Farm Bill into law, everything changed. Hemp is a plant that contains very little (usually less than 0.3%) cannabidiol and is completely free of THC.
Immediately following the legislative change, there was a tremendous increase in business and demand for CBD merchant accounts. However, most banks and merchant accounts are reluctant to work with such high-risk businesses.
Realizing the trend and refusal of popular banks to cater to CBD specific high-risk businesses – many started providing CBD merchant processing services. And, if you would like to move ahead and accept credit and debit cards payments, you need to find a merchant accounts for CBD service that fully understands and deals with all aspects of CBD business to ensure the best-in-class, robust services & support – throughout.
As the markets, culture, and environment continue to change, so too will the rules and regulations governing the central business district. And, with the suitable partner by your side, you can concentrate on what you do best: serve your consumers.
Also Read: How to Get a CBD License?
CBD Merchant Accounts vs. Regular Merchant Accounts: What’s the Difference?
There are lot of differences between a normal merchant account and CBD merchant account. And, if you are a CBD business – you should know about differences to get the basic and make the right choice.
1. Risk Assessment
- Regular Merchant Account: Regular merchant accounts cater to businesses in low-risk industries, where the risk of regulatory issues and chargebacks is minimal. Payment processors view these accounts as predictable and stable, with fewer complications in setting up and maintaining the account. Payment processors and banks are more confident working with these industries, knowing the risk of fraud or compliance violations is low.
- CBD Merchant Account: CBD merchant accounts on the other hand are classified as high-risk due to the complex regulatory landscape surrounding CBD products. While CBD is legal in many areas, it is still subject to strict regulations at federal and state levels, which can is subject to change at any time. This uncertainty makes CBD businesses a little higher hesitant liability, as they might face potential legal consequences if a merchant doesn’t comply with laws.
2. Approval Process
- Regular Merchant Account: The approval process for regular merchant accounts is quick & straightforward. They just need to provide basic documentation. Even, processing times are usually short, with most applications being approved within a few days or even hours.
- CBD Merchant Account: Due to the high-risk status of the CBD industry, the application and approval process for CBD merchant accounts is more rigorous and time-consuming. CBD businesses have to provide comprehensive documentation, such as detailed product descriptions, evidence of compliance with state and federal regulations, and in some cases, proof of insurance.This additional scrutiny is necessary to ensure that the CBD merchant complies with the law, reducing potential liabilities for the payment processor and uninterrupted services for the merchants as well.
3. Fees and Rates
- Regular Merchant Account: As low-risk businesses have fewer chances of encountering fraud or legal complications, the providers charges relatively low processing fees and minimal monthly charges. Transaction fees are often predictable as well, and some providers even offer custom fee structures for high-volume merchants. These businesses can also take advantage of seasonal discounts or reduced rates.
- CBD Merchant Account: CBD merchant accounts charges higher transaction fees, setup costs, and monthly fees due to the comparuively higher risk associated with the industry. It helps them cover the increased risk of chargebacks and legal scrutiny. As a result, getting a CBD merchant account is more expensive, but it is important as helps these businesses to access reliable payment solutions within the confines of industry regulations.
Also Read: How to choose the Best CBD Payment Processing Company?
4. Compliance Requirements
- Regular Merchant Account: Businesses using regular merchant accounts usually follow straightforward compliance protocols that align with general business practices, such as data security standards (e.g., PCI-DSS compliance) and anti-fraud measures. Even, the compliance process for regular merchant accounts generally focuses on financial stability and adherence to standard industry regulations, with few specialized checks.
- CBD Merchant Account: CBD businesses needs to abide by strict compliance requirements and need to adhere to specific guidelines, such as verifying the legality of their products, ensuring proper labeling, confirming that they meet age verification standards for customers, getting all the certifications, licenses, permits, etc.Many CBD payment processors also mandate periodic compliance audits as the CBD rules and regulations keeps on changing to ensure ongoing adherence to state and federal laws. Failure to comply can lead to immediate account suspension or other serious consequences as well.
Also Read: How to Get a CBD License?
5. Chargebacks and Fraud Protection
- Regular Merchant Account: Low-risk industries generally experience fewer chargebacks and are less prone to fraud, so they use basic fraud protection services. Standard merchant accounts have common fraud prevention measures but don’t typically require advanced chargeback management.
- CBD Merchant Account: The high-risk nature of CBD sales means these accounts require robust fraud and chargeback protection. CBD transactions are often flagged as higher risk, leading to increased instances of chargebacks, whether due to regulatory issues, misunderstandings about CBD legality, or buyer uncertainty.As a result, CBD merchant accounts incorporate specialized fraud prevention tools and chargeback management services to protect merchants and payment processors from financial losses.
6. Supported Payment Processors
- Regular Merchant Account: Regular merchant accounts have the advantage of a wide variety of payment processors to choose from, as most financial institutions work comfortably with low-risk businesses. From major banks to popular fintech companies, businesses in traditional industries can find payment processing options that suit their specific needs. This flexibility makes it easier for these businesses to find competitive rates and convenient features without worrying about legal limitations or restrictions.
- CBD Merchant Account: In the contrast, since CBD businesses are classified as high-risk, they have a limited pool of payment processors willing to work with them. Many mainstream processors avoid high-risk industries like CBD due to legal concerns, leaving CBD merchants to work with specialized payment processors or high-risk merchant account providers. This restricted choices means higher costs and fewer features comparatively.
7. Contract Terms
- Regular Merchant Account: Many regular merchant accounts offer flexible or short-term contract options, allowing businesses to terminate their services without heavy penalties.With low-risk industries, payment processors are generally more comfortable with month-to-month agreements or short-term contracts, knowing there is minimal risk involved. This flexibility makes it easier for businesses to switch providers if they find better rates or services.
- CBD Merchant Account: Due to the high-risk nature of CBD businesses, many payment processors require long-term contracts to offset potential losses and maintain consistent service. These contracts often come with early termination fees or other penalties if the merchant decides to cancel – limiting flexibility for CBD businesses seeking competitive alternatives.
8. Rolling Reserves
- Regular Merchant Account: For low-risk industries, payment processors rarely implement rolling reserves, meaning businesses have full access to their funds after each transaction. In these industries, payment processors don’t see a need to hold back a portion of the funds as collateral against potential chargebacks or losses, as the risk of issues is low.
- CBD Merchant Account: It’s common for CBD merchant accounts to require a rolling reserve, which is a percentage of each transaction held by the processor for a set period, often 90–180 days. This reserve acts as a financial cushion to protect against unexpected chargebacks or account termination. While it limits immediate cash flow for CBD businesses, it’s a standard practice for high-risk accounts to minimize potential losses.
9. Supported Currencies and International Transactions
- Regular Merchant Account: Regular merchant accounts often support a wide variety of currencies and international payment options, allowing businesses to easily expand into global markets. Low-risk industries can typically work with any major bank or payment processor that offers international services, with minimal concerns about currency restrictions or additional regulatory hurdles.
- CBD Merchant Account: International payment processing is more complicated for CBD businesses due to differing CBD regulations across different countries. Many CBD merchant account providers focus on domestic transactions, limiting international currency support. For businesses wanting to expand globally, this can create hurdles in finding the right provider. Even, if you will – you need to pay the higher charges with the processors who are willing to navigate the complexities of cross-border CBD regulations.
10. Banking Relationships
- Regular Merchant Account: Regular merchant accounts benefit from partnerships with a broad range of banks, as financial institutions are generally comfortable working with low-risk industries. These banking relationships are stable, that helps businesses in low-risk industries to access additional financial services like loans or lines of credit without any challenges from the bank.
- CBD Merchant Account: Since CBD businesses are classified as high-risk, many banks are hesitant to work with them. Only specialized or high-risk banks provide services to CBD businesses with restrictive services and higher charges. Due to which, CBD merchants may face limitations when it comes to accessing credit, loans, or alternative financial services -which might impact their operations and growth potential.
Also Read: Which Banks Support CBD Businesses?
11. Transaction Settlement Times
- Regular Merchant Account: For regular merchant accounts, funds from transactions are typically settled quickly, often within one or two business days. They don’t usually face extra delays in receiving their money(unless there is some error or problem), as payment processors have minimal concerns over the transactions. This quick settlement helps businesses maintain steady cash flow without interruptions.
- CBD Merchant Account: CBD merchant accounts on the other hand may experience longer settlement times, with some transactions taking several days or even a week or more to process.Payment processors may sometimes delay settlement to ensure that all transactions comply with industry regulations and to manage the high-risk nature of the account. This is for the security but delay can affect cash flow for CBD businesses, making it essential for them to plan accordingly to avoid cash shortages.
Is It Easy to Find the CBD Merchant Account?
It is easy to find the CBD merchant account, but is not easy to find the (best, compliant, reliable and supportive) CBD merchant account. You need to follow an extensive process. It is bit time consuming – but the efforts will be worth it when you get the seamless experience later on.
To make the process bit easier for you – here’s what you should look while choosing the right CBD merchant account provider for your business.
- Experience with High-Risk Industries: CBD is a high-risk industry with lots of rules and regulations, so pick a provider with experience in handling high-risk accounts seamlessly and ensure best-in-class services.
- Compliance & Security: Finding the compliant and secure CBD provider is an essential. You need to look for a CBD complaint and highly secure provider to ensure seamless operations, robust security and lesser frauds.
- Clear, Fair Pricing: High-risk accounts tend to have higher and hidden fees structure. So, make sure to find a provider with competitive & transparent pricing structure, so you know what you’re paying for without surprises.
- Strong Chargeback Protection: CBD sales often see higher chargebacks. So, make sure to opt for a CBD merchant payment partner that offers end-to-end fraud detection and chargeback tools to protect your business.
- Flexible Contracts: CBD businesses usually have rigid and long-term contracts. So, find a provider who offers short-term and flexible contracts – so you can switch if you want to for better competitive rates or service.
- System Integration: Integration is the need of the hour. So, the chosen CBD merchant account should seamlessly integrate with your existing e-commerce, POS and other platforms for a seamless experience.
- Responsive Customer Support: Go for a provider who can provide you with accessible, 24/7 support to quickly resolve issues and minimize downtime.
- Good Reputation: Check reviews and feedback on their website, social media and other third-party platforms from other CBD businesses. A trusted provider with positive feedback and robust market reputation will provide reliable, dependable and robust payment solutions.
Get in Touch with CBD Merchant Solutions!
While now when you are aware how to get the CBD merchant solutions provider for your business – it’s time to begin your search. If you are on the lookout – you can check our CBD Merchant Solutions.
We are your trusted CBD merchant payment partner – who are compliant in handling high-risk CBD businesses. On top of it, we even offer the needed 24/7 support followed by robust security measures, 0% processing fees, next-day approvals, faster payouts, top-notch fraud protection, chargeback management, etc.
To know more about how we can better assist you – you can book a free demo now and if everything seems find you can move ahead. So, what are waiting for? Ger started right way.
To Wrap It Up!
Here’s the wrap on everything you need to about the major differences between the CBD merchant vs Normal Merchant Account and why it is important for CBD businesses to choose the right high-risk merchant payment provider for your business. By choosing the right type of merchant account, you can ensure seamless payments, improved customer experience, proper cashflow, etc.
If you would like to try out CBD Merchant Solutions and how it simplifies payments for your business, then book a free demo right away.