CBD products have witnessed remarkable growth, gaining support from consumers and medical professionals alike. However, the ever-changing landscape of restrictions on CBD merchants poses challenges for entrepreneurs seeking to tap into this burgeoning industry.
CBD Legality: Navigating the Legal Landscape
Navigating the legality of CBD products is crucial for merchants. While the sale of CBD is generally legal, variations exist at both state and federal levels. The 2018 farm bill played a pivotal role in altering regulations for hemp and CBD products. 1 States typically impose limits on THC content, often capping it at 0.3%. 2 Some states require a medical license for consumers to purchase CBD, allowing higher THC concentrations. Merchants must comprehend these nuances before considering a merchant account or venturing into online CBD sales.
Startup Costs for CBD Businesses: A Crucial Consideration
Startup costs are a significant consideration for CBD merchants. Opting for an e-commerce store proves to be a cost-effective choice, eliminating the need for physical retail spaces. However, a high-risk merchant account is essential for processing payments efficiently. This article delves into the intricacies of these startup costs and provides insights into obtaining a high-risk merchant account for a successful CBD business launch.
High-Risk Status of CBD Products: Overcoming Processing Challenges
CBD products fall into the high-risk category when it comes to credit card processing. Factors contributing to this classification include a higher rate of chargebacks, large transaction volumes, susceptibility to fraud, and mislabeling concerns. In a recent investigation conducted by Penn, it was revealed that approximately 70% of CBD products available for purchase online exhibit inaccuracies in labeling, either exceeding or falling short of the stated content. 3 Despite these challenges, merchants can thrive in the online CBD business by partnering with experienced high-risk payment processors. Understanding the dynamics of CBD credit card processing is crucial for sustainable success.
Consequences of Selling CBD Without a High-Risk Merchant Account
Some merchants may consider concealing their CBD sales to avoid high-risk processing fees. However, this strategy can backfire, leading to fraudulent activity and potential account termination. The article emphasizes the importance of securing a high-risk merchant account from the outset, detailing the benefits of proper compliance.
Identifying CBD-Unfriendly Payment Processors: A Critical Overview
While several payment processors claim to support high-risk merchants, many popular platforms restrict or prohibit CBD product sales. Merchants are advised to choose payment processors specializing in high-risk and CBD processing to ensure compliance and receive optimal service.
Additional Restrictions Beyond Payment Processing: Banks and E-commerce Platforms
Beyond payment processing, CBD merchants must be aware of restrictions imposed by banks and e-commerce platforms. Securing a CBD-friendly bank is essential to avoid account freezes, considering the inconsistency between state and federal laws. E-commerce platform choices also impact CBD product sales, necessitating careful consideration and adherence to platform-specific guidelines.
Applying for a High-Risk Merchant Account: A Step-by-Step Guide
Applying for a high-risk merchant account may seem daunting, but the process can be streamlined with proper guidance. The article outlines essential steps, including business registration, obtaining a CBD-friendly business bank account, and choosing a reliable high-risk payment processor. Detailed documentation, credit score evaluation, and bank account verification are integral parts of the application process.
Red Flags in the Search for a CBD Merchant Account: Warning Signs to Note
Merchants seeking high-risk accounts should be cautious of red flags, including poor customer service and promises of instant approval. The article highlights the importance of thorough vetting and cautions against misleading claims made by some high-risk payment processors.
Embracing Growth with a High-Risk Merchant Account for CBD: A Trusted Partner
In the face of restrictions on CBD merchants, entrepreneurs can find reliable partners specializing in high-risk processing and CBD payment solutions. The article encourages merchants to explore customized payment solutions for their unique needs to ensure long-term, sustainable growth in the thriving CBD industry.
Footnotes:
- "How The 2018 Farm Bill Changed Everything" , cbdMD, 2023. cbdMD
- "Study Reveals Inaccurate Labeling of Marijuana as Hemp", National Institute of Justice, 2022. NIJ
- "Penn Study Shows Nearly 70 Percent of Cannabidiol Extracts Sold Online Are Mislabeled", Penn Medicine News, November 07, 2017. Penn Medicine News
Author
Writing for Touchsuite, Jonathan Bomser, is a technology and marketing expert with over 30 years of industry experience. He is a businessman, writer, artist and musician. He has vast knowledge of finance, business and technology. Jonathan is currently founding, investing and board advising in several early stage and start up companies. Jonathan has been involved in Technology, Media, Marketing and Advertising for a multitude of Fortune 500 companies for over 30 years.He has served as a strategic, creative and marketing executive and consultant for both parent companies and subsidiaries at AOL, The National Football League, The Walt Disney Company, NBC, MTV, Viacom, Time Warner, USA Today, Alliance Entertainment, WPP, Penguin USA, along with numerous other established companies, start-up ventures and reorganizations.Jonathan was the CEO and Founder of BigLinker.com, which was acquired by Ziff Davis (Nasdaq: ZD) in 2021, CEO and Founder of TownTarget.com from 2013-2015 which was acquired by Touchsuite/American Bancard in 2015 and previously Bomser Payan Interactive Agency from 2008-2012 which was acquired by Big Step Interactive/Digital Marketing Associates. Jonathan was the key developer for the technology used to power many of their successful digital campaigns. Clients included national brands such as Adidas, PNC Bank, Massage Envy, European Wax Center and others.Jonathan has also helped manage the technology initiatives, creative strategies and business development for AIM Pages.com, AOL’s Social Network. Since May 2006, Jonathan has also been consulting for technology, marketing, sales and creative strategies for Veoh.com, BigString.com, Vuguru.com and others. Before consulting for these major companies, Jonathan was a principal in En Pea Productions,Inc. which was a television production company focused on reality television, commercials and music videos. Jonathan is also the former Board Member, CEO and President of WoozyFly.Inc. Trading on under the symbol WZFY.Jonathan's current projects at AccountSend.com, VocalChimp.com and CoolValidator.com
Touchsuite is located in Boca Raton, FL and is a payment processing and point of sale company that specializes in merchant accounts, point of sale systems, Grubbrr self-ordering kiosks.
Recent Posts
