May 9, 2024

Cannabis Credit Card Processing

By Karen Eloriaga
Read more about High Risk Payment Processors
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Learn everything you need to know about cannabis credit card processing. You'll find the best processors in the end, too.

The cannabis industry has seen significant growth and legalization in recent years, opening up new business opportunities. But can you accept credit cards as payments for cannabis products?

Due to federal law and card brand rules, you can't. That said, there are still payment processing solutions that enable you to take digital and card payments as a workaround.

You can learn all about these workarounds, the challenges, and the future of cannabis processing in this article. Plus, shop around for the best processor at the end.

Challenges Associated with Cannabis Processing

Knowing the challenges can help you better understand the services of cannabis payment processors and manage expectations.

Here are some of the main challenges you may encounter.

Legal Constraints

Cannabis businesses must comply with industry regulations to operate legally. These regulations may change from time to time, and they vary per state.

In addition, the Controlled Substances Act of 1970 is a federal law that classified cannabis as a Schedule I drug.[1] This means cannabis dispensaries are still performing illegally under federal law, even though some states have legalized cannabis for medical or recreational use.

For this reason, the Schedule I classification has been widely criticized for being outdated and not based on scientific evidence.

In how many states is medical marijuana legal?
As of April 2023, cannabis is fully legal (medical and recreational) in 24 states, while medical marijuana is legal in 38 states.[2]

Limited Access to Banking Services

Many traditional banks refuse to provide financial services to cannabis dispensaries because it's still federally illegal. This leaves dispensaries with limited options for banking services.

That said, it's legal to accept ACH and bank transfers at a dispensary.

What is an ACH payment?
An ACH payment is an electronic payment made between two banks— as long as they use the ACH (Automated Clearing House) network. You'll need a payment gateway and an ACH processing account to accept these payments.

High Processing Fees

Due to the high-risk nature of the industry, cannabis payment processors can charge higher fees to compensate for the risks.

These fees can eat into your profit margin, making it essential to find processors with competitive rates.

Finding Reliable Payment Processors

Cannabis merchants need processors that understand the unique challenges of the industry and can provide reliable payment solutions. You can start your hunt by checking out the 8 cannabis payment processors on this list.

Is it legal to process credit cards at a cannabis dispensary?
Unfortunately, you cannot process credit cards at a cannabis dispensary. Major credit card providers, like VISA, Mastercard, and American Express, prohibit credit card payments for cannabis because it's still federally illegal.

That said, it's federally legal to process credit card payments for industrial hemp (a product with 0.3% or less THC), like hemp seeds and fiber — thanks to the 2018 Farm Bill.[3]

Now that you know you can't accept credit card payments, here are a few reminders on why cash isn't exactly your next best option.

Risks of Cash Payments in Cannabis Dispensaries

Although cash payments have been widely used in the past for purchasing cannabis products, they now have a lot of downsides compared to accepting digital payments.

Cash payments limit your ability to upsell

When customers come into your store, they can only purchase products they can pay for with their cash on hand.

But if customers pay with ACH or digital wallets, it's easier to purchase more products since the money is coming straight from their bank account.

In addition, if you sell cannabis products online, you also have the potential to increase basket sizes (by 20% to 30%) with digital or card payments.[4][5]

Cash payments pose more logistics and security challenges

Manual entry of cash transactions is more prone to errors or inaccuracies. Transactions may also be slower due to the manual counting of cash and change.

And if you deposit your daily or weekly earnings, you'll need armored vehicles to protect your cash. This may encourage armed robberies, which put your drivers and your business at risk.

Cash carries germs and bacteria

Cash is notoriously covered in germs. And since the COVID-19 pandemic, people have been more cautious about touching physical cash. More and more customers have been preferring to use contactless payments for more safety.

That said, providing the option to pay digitally can encourage more customers to make a purchase.

Cash Alternatives for Cannabis Transactions

In the past, cash was the primary mode of payment when purchasing cannabis products from dispensaries. But more and more of these businesses are starting to accept the following:

Debit Payments

Cannabis payment processors let you accept debit payments from your customers as a substitute for cash. This could be through digital wallet payments, cashless ATMs, or PIN debit payments.

Cashless ATM functions like a traditional ATM. Customers perform an ATM transaction at the point of sale. These transactions are usually paid in increments of $5 (in some instances, $1).

PIN Debit transactions, on the other hand, let customers pay the exact amount. They'll pay your business with the money they already have in their bank accounts.

Potential Compliance Issues with Cashless ATMs in Cannabis Transactions
Although widely accepted by cannabis payment processors, cashless ATMs and PIN debit transactions may be going against card network policy agreements.

ACH Payments and eChecks

ACH payments, or Automated Clearing House payments, are electronic transfers of money between bank accounts.

While not as convenient as credit or debit card payments, ACH payments provide a more secure and traceable payment option for both customers and dispensaries.

Customers can pay through eChecks or wire transfers. You can email them invoices. Or they can also simply scan a QR code for payment. These can be more secure and reliable since you can verify right away if funds have been transferred into your account.

Cryptocurrencies

Dispensaries have turned to accepting cryptocurrencies, like Bitcoin, as an alternative to traditional payment methods.

It provides a safe, secure, and easy way for customers to make their purchases. This also ensures that their transactions are discreet.

Can cannabis companies use credit cards?
Cannabis businesses cannot access financial services, like credit cards, since marijuana is still federally illegal. Paying for cannabis products through credit cards is against the terms of the card networks.

Having said all this, is accepting card payments with dispensaries sustainable? Here's what the future looks like for the industry.

The Future of Cannabis Payment Processing

According to Headset, a team of analysts for the cannabis industry, the market for cannabis in the U.S. can potentially reach $45.8 billion by 2025.[6]

This can mean that people may open up more to the industry. And this may encourage more businesses and institutions (potentially card networks) to work with it.

The SAFER Banking Act can also add to this optimistic future.

SAFER Banking Act

The SAFER Banking Act ensures that all businesses, including cannabis dispensaries, have access to financial services like deposit accounts and insurance.[7]

It's meant to provide safety for banks, credit unions, and other financial institutions in providing financial services, given the conflict between federal and state laws.

It also helps that President Biden gave a statement for marijuana reform last October 2022.

Recommendation to Move from Schedule I Drug to Schedule III

In the President's statement, he said that no person should be in jail for using or possessing marijuana.[8]

The statement includes pardoning all federal offenses for drug possession and the review of marijuana's schedule under federal law. After which, HHS recommended to the DEA that marijuana be rescheduled from a Schedule I drug to a Schedule III.[9]

This recommendation is based on the FDA's review of marijuana as requested by the president.

That said, if marijuana is to be rescheduled, it means:

  • It becomes lawful to manufacture, distribute, dispense, and possess medical marijuana.
  • Marijuana producers and retailers can now deduct the costs of selling cannabis products from their federal income tax filings.
  • There will be no more quota limitations for the production of marijuana.

Given its seemingly bright future, you may be more likely to opt for cannabis processors now. Here are your best options.

Top 8 Cannabis Credit Card Processors

Major credit card networks don't accept credit card payments for cannabis products. However, the processors on this list provide you with other means to accept digital payments.

On top of the list, you have the best processor for a growing cannabis dispensary.

Cova Pay: Easy Compliance and Expansion

There's a lot less to think about with Cova Pay. You could be a single-store or multi-location business, and it'll still be easy to manage your account.

Cova Pay takes care of the compliance requirements (so you don't need to worry so much about state laws).

More reasons to like Cova Pay:

  • 99.99% Uptime
    Cova Pay boasts an impressively high uptime, even on busy days like 4/20. Plus, the processor has over 20 years of tech experience. And it even has great user reviews and recommendations.

  • 98% Retention Rate
    The payment processor can support you as you grow your business into a high-volume one. This is proven by the company's 98% retention rate.

  • Versatile Payment Solutions
    You can make use of the processor's tablet-based point-of-sale system, especially designed for cannabis retail. You can also accept ACH payments and branded gift cards from your customers.

Cova POS features include:
  • Age verification (through the built-in ID scanner)
  • Customer management and loyalty program
  • Inventory management (with compliant tracking and state traceability systems)
  • Offline mode
  • Reporting and analytics
  • Fraud prevention tools

Downsides:
Cova Pay's monthly fees are expensive. A single store with one POS workstation will cost you $349/mo (+$60 for additional workstations).

If you have multiple stores, it can cost you $549/mo for up to 4 POS workstations (+$40 for additional workstations).[10] However, you can opt for custom pricing if you're a large cannabis dispensary.

What is the best ACH for cannabis?
Cova Pay is one of the best ACH payment processors for cannabis businesses. This processor ensures a 99.99% uptime, even on high-volume days like 4/20. Plus, the number of amazing user reviews and stories can give you more confidence that the processor provides great services.

If Cova's pricing is too expensive, you can check out this next processor. It offers short-term contracts and no monthly fees.

Flowhub Pay: Short-term Contracts

High-risk businesses usually get long-term contracts due to the nature of their business. But with Flowhub Pay high-risk merchant accounts like cannabis businesses can opt for a "month-to-month" contract.

That said, with Flowhub Pay, you do need to send a formal written notice 60 days before you cancel the service.[11]

More reasons to like Flowhub Pay:

  • 1-Day Approval
    Flowhub Pay has processed over 8 million card payments since it started. It boasts 1-day approval, so you can start taking payments right away. Plus, you get a dedicated account manager in case you have concerns.

  • Free Merchant Account
    Your merchant account comes with no monthly fees. But you have to pay for hardware and setup. Or you can use third-party hardware since Flowhub works with Mac and Windows.

  • Debit Card Processing
    You can accept debit card payments from your customers through the integrated POS system.

What you can do with Flowhub Pay POS:
  • Set budtender tips
  • Manage multiple store locations
  • Set staff permissions
  • Set purchase limits and age verification
  • Review reports and analytics

Downsides:
You must have a business bank account to work with Flowhub. Personal accounts don't count.

That said, you should first check if your bank allows Flowhub as a payment facilitator for cannabis products. This can be extra work on your part.

You'll also need multiple apps to use certain features like age verification and transfer of inventory instead of having one mobile app for all features.

BlazePay: Medical & Recreational Marijuana

BlazePay is an all-in-one payment processor for cannabis dispensaries. It's a good option whether you're selling medical or recreational marijuana.

You can sell CBD products in-store and online since the processor offers omnichannel selling. Your customers can pay through PIN Debit, ACH payments, and cashless ATMs.

More reason to like BlazePay:

  • Boost in Revenue and Tips
    Cannabis dispensaries that have used BlazePay have seen a 200%+ increase in budtender tips and a 35% increase in basket size.[12]

  • Compliance Automation
    The POS also automates state compliance through Metrc and BioTrack traceability integrations.

  • Flexible Payment Options
    Your customers can pay through debit cards and smartphone wallets. You can also charge pre-payments online or add convenience fees.

What you can do with BlazePay:
  • Encourage customers to increase basket size by using their debit cards
  • Verify age and medical recommendations
  • Manage multiple store locations
  • Set up cannabis delivery services
  • Set up a loyalty program
  • Manage inventory (perform bulk updates, transfer inventory, etc.)

Downsides:
You'll need to contact BlazePay for a custom quote. Its processing fees vary depending on your program. The fees also depend on your goals, processing volume, and methods of fulfillment.

If your processing fees end up expensive with BlazePay, you can check out Paybotic instead.

Paybotic: Zero Transaction Fees

Paybotic is unique on this list, considering it won't charge you transaction fees for debit processing. You only pay the onboarding fee and monthly fees.[13]

You can get approved for an account the same day you apply. Then, you can get started with accepting debit card payments, eChecks, and gift cards.

More reasons to like Paybotic:

  • CBD & Hemp Business Friendly
    Paybotic supports retail cannabis businesses, like those selling CBD or hemp products.

  • Diverse Payment Methods
    Your customers can pay with debit cards or PIN-enabled credit cards. Or you can send customers invoices to be paid through ACH or eChecks.

  • Online and In-Store Integration
    Paybotic integrates with most online shopping carts. You'll also get features for delivery and curbside pickup if you have a physical location.

Other Paybotic Features:
  • Wireless terminals for delivery payments
  • Next-day expedited funding or calendar-day funding
  • End-to-end encryption and EMV compliance
  • Solutions compliant with federal and state regulations
  • 24/7 merchant support
  • Merchant cash advances and cannabis banking solutions

Downsides:
CBD and hemp merchant accounts may still get transaction fees depending on your agreement. So be sure to read the fine print.

Monthly fees can also be costly, depending on your business size.

Dutchie Payments: Best Customer Support

Customer support is one of the most important considerations for a payment processor. Dutchie Payments tops the list with an average response time of 60 seconds.

Plus, the support team is available 7 days a week.

More reasons to like Dutchie Payments:

  • High-Volume Processing Expertise
    Dutchie Payments is one of the established cannabis payment processors, processing over $19B in cannabis payments per year.

  • All-In-One Dispensary Solution
    If you opt for Dutchie POS and Dutchie E-commerce, you can have an all-in-one solution specifically designed for cannabis dispensaries.

  • Flexible Payment Options
    Customers can use Dutchie Pay, an ACH payment processing solution, to pay online. You can also accept debit payments for in-person sales.

Dutchie POS and Dutchie Ecommerce Features:
  • Track sales, like your most popular products and average cart size
  • Review your busiest hours
  • Access support for traceability through Metrc, BioTrack, etc.
  • Set up bulk deliveries and assign multiple orders to a single driver
  • Purchase POS hardware for your physical location
  • Completely customize your menu
  • Use an embedded menu if you already have a website

Downsides:
Dutchie Payments doesn't state its processing rates on its website. You'll have to contact them for a quote. Pricing for features is also not available online.

If you prefer more transparency on pricing, you can check out PaymentCloud instead. They provide easily accessible rate information.

PaymentCloud: Reliable High-Risk Processor

PaymentCloud is one of the more established high-risk processors offering CBD merchant accounts. A dedicated account manager will assess your business and guide you on a suitable payment solution.

PaymentCloud is also more transparent with its rates, stating that CBD payment processing rates typically range from 2.95% to 5%.[14] There are no long-term contracts typical for high-risk businesses.

More reasons to like PaymentCloud:

  • Comprehensive CBD Product Support
    PaymentCloud supports traditional CBD and hemp-driven products. This includes CBD for skincare, CBD supplements, hemp oil, CBD ingestibles, CBD drinks, and pet-friendly CBD items.

  • Flexible Online and In-Store Integration
    You can also sell online or in person. Just integrate your CBD merchant account into your website from BigCommerce, WooCommerce, Shopify, etc.

  • Diverse Payment Hardware Options
    If you have a brick-and-mortar store, you can select from various stationary and mobile card readers to accept payments.

Downsides:
Some PaymentCloud clients struggled to contact their dedicated account manager and have had a couple of account issues. Many of them also experienced hidden fees.

Compared to other cannabis payment processors on this list, PaymentCloud doesn't state features specifically beneficial for the CBD industry.

Instabill: For E-Commerce Cannabis Giants

Instabill is a credit card processor that has been working with high-risk e-commerce businesses since 2001. It focuses on credit card processing for cannabis products, particularly CBD hemp oil.

It offers 2 payment processing solutions for your cannabis dispensary: debit and cryptocurrency solutions.

More reasons to like Instabill:

  • Best for High-Volume Sales
    Instabill is best suited for larger businesses due to the minimum volume requirement, which is at least $1,500/week in payment processing.[15]

  • Innovative Debit Solution
    Through the debit solution, your customers will connect their bank account to load and reload a given card for payments. The payment card functions similarly to a mobile wallet.

  • Cryptocurrency Payment Options
    If you want to accept cryptocurrency, like Bitcoin and Ethereum, Instabill can offer you a POS countertop device and a cryptocurrency ATM to collect these payments.

There's real-time conversion of cash to crypto and vice versa. The machine also comes with biometric security features such as facial and fingerprint scanning. You'll receive the funds within 24 hours.

Downsides:
Instabill offers limited customer support. You can only access its support team from Monday to Friday, 8 am to 6 pm, U.S. Eastern time.

This payment processor is not suited for brick-and-mortar stores. The minimum processing volume required also makes it inaccessible for small businesses. Approval of smaller businesses is on a case-by-case basis.

On top of all that, you may be surprised by the fees, like monthly statement fees, payment gateway fees, six-month rolling reserves, and chargeback fees. So, this processor may not be the most affordable option.

Instabill offers CBD merchant accounts and medical marijuana merchant accounts. However, the medical marijuana merchant account is not available in the U.S.

B.I.G.: High Approval and Client Retention

Bankcard International Group has over 20 years of experience in high-risk payment processing. And it has been working with cannabis dispensaries since 2006.

The payment processor currently has a 98% approval rate and 97% client retention rate. You get a free consultation and can count on fast approvals.

More reasons to like B.I.G:

  • Diverse Product Support
    Bankcard International Group supports multiple cannabis products such as CBD Oil, edibles, pet products, flowers, topical products, and vape products.

  • Versatile Payment Options
    The processor also offers interchange-plus pricing. You can accept payments through PIN debit, eChecks, and digital currencies like Bitcoin.

  • Mobile Terminals & Cloud Sync
    You can use their wireless mobile terminals for in-person payments. Your transactions sync to the cloud right away.

Downsides:
It's hard to find client reviews of Bankcard International Group, even if it has over 20 years of high-risk payment processing experience (and 18 years of CBD payment processing).

This can make it challenging to know how efficient the company's service is.

How to Choose a Cannabis Payment Processor

It's difficult to find a credit card processor for cannabis dispensaries — mainly because it's against the terms of the card networks to process cannabis payments.

That said, many cannabis processors provide a workaround by offering other digital payment solutions. Here's how to know you're looking at the right option:

Legitimacy
Many cannabis payment processors work with large cannabis dispensaries and cannabis tech partners. This can be a good sign of the company's reliability.

For example, Cova works with Native Roots Cannabis (20+ locations in Colorado) and Spiritleaf (100+ locations in Canada).

Accepted Payment Methods
Some cannabis payment processors offer more payment methods than others. Typically, you can accept debit, ACH, eChecks, cryptocurrency, and cashless ATM payments.

Features
Do you need an online store? Do you offer delivery and curbside pickup? Make sure that the processor offers what your business needs now and in the long run.

Integrations
Since cannabis processors work with cannabis tech and agencies, you may get integrations for analytics, compliance, CRM, delivery, menus, etc.

Pricing and Fees
Some processors are more transparent than others. For example, Cova specifically tells you how much its monthly fees are. However, many other processors require a custom quote.

Compliance with Federal and State Laws
The cannabis industry is highly regulated. So you'll want a processor that's also updated with the most recent changes in the law.

Customer Service
Great customer service is always essential when looking at a payment processor. You can test out the customer service as you make inquiries during consultations.

Consider reading online reviews. You can learn from the experiences of other business owners who use cannabis payment processors.

Does Mastercard allow cannabis transactions?
Mastercard does not allow the purchase of cannabis products through its debit cards due to the drug being federally illegal. This includes the use of bank cards and PIN debit, which can make it extra challenging for cannabis dispensaries to accept payments, even with a processor.[16]

Methodology

To be one of the best payment processors for cannabis dispensaries, the processor should accept payment methods other than cash. It should also be compliant and always updated with the changes in regulations.

Because cannabis is a very niche industry, the POS should also cater to its unique needs, like age verification, support for order traceability, and delivery services. Plus, it ideally supports various CBD products to support a wide range of cannabis retailers.

We also considered the processor's reputation through customer reviews. It has to be reliable with proven track records.

Bottom Line

It can get tricky to accept card payments for your cannabis dispensary. Not to mention, you cannot accept credit card payments and would have to rely on cash or cash alternatives.

But because it seems to have a more welcoming future, then you can consider opting for cannabis payment processing companies instead of manually taking cash payments.

Just make sure that the cannabis processor is well-informed and updated with the industry's regulations. And that it's packed with features that can support you in the long run.

References

  1. ^ DEA. Drug Scheduling, Retrieved 02/23/2024
  2. ^ NCSL. State Medical Cannabis Laws, Retrieved 12/10/2023
  3. ^ FDA. Hemp Production and the 2018 Farm Bill, Retrieved 01/26/2024
  4. ^ Flowhub. The 2023 Guide to Cannabis Payment Processing Solutions, Retrieved 01/14/2024
  5. ^ Dutchie Payments. Cannabis Payment Processing, Retrieved 01/14/2024
  6. ^ Headset. Cannabis Sales Projections for U.S. Markets in 2025, Retrieved 12/10/2023
  7. ^ Senate Democrats. SAFER Banking Act, Retrieved 02/23/2024
  8. ^ The White House. Statement from President Biden on Marijuana Reform, Retrieved 12/10/2023
  9. ^ Congressional Research Service. Department of Health and Human Services Recommendation to Reschedule Marijuana: Implications for Federal Policy, Retrieved 12/10/2023
  10. ^ Cova. Pricing, Retrieved 12/10/2023
  11. ^ Flowhub Pay. Flowhub Cash Terms & Conditions, Retrieved 05/10/2024
  12. ^ Blaze. BlazePay, Retrieved 02/23/2024
  13. ^ Paybotic. FAQs: What is the fee structure?, Retrieved 02/23/2024
  14. ^ PaymentCloud. CBD Merchant Account, Retrieved 12/10/2023
  15. ^ Instabill. How Do I Get A CBD Merchant Account?, Retrieved 02/23/2024
  16. ^ The New York Times. Mastercard Moves to Stop Use of Debit Cards at Cannabis Shops, Retrieved 12/10/2023

Write to Karen Eloriaga at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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