Take a walk through Haight-Ashbury in San Francisco, and you’ll find plenty of “head” shops. These stores, which usually sell tobacco products and other items related to smoking and vaping, now have competition from online tobacco resellers. E-commerce opportunities have opened up a whole new world for this industry.
Why is the tobacco industry labeled “high risk”?
However, it can be difficult to secure a merchant account for those in the tobacco industry. These businesses fall into the category of “high risk payment processing.” Several factors contribute to this. First, there are strict government laws regarding tobacco, and they are often not consistent from state to state. This is further complicated by the fact that the laws are constantly changing, which opens up the risk of a tobacco reseller not being in compliance with the law. In addition, the industry as a whole has high chargeback rates making it a liability for acquiring banks.
On top of this, MasterCard has instituted security rules that apply to online tobacco resellers. Section 9.4.3 of the MasterCard Security Rules requires these businesses to pay a $500 annual registration fee. Furthermore, these businesses are required to undergo an annual review by an independent attorney. The purpose of this review is to validate that the business is in compliance with all state and national tobacco laws, as well as all credit card industry standards for Payment Card Industry (PCI) compliance. Also, if a customer uses a MasterCard for the purchase, the items must indicate “Adult Signature Required” for delivery. As you can see, the challenges for tobacco resellers are greater than for other types of businesses.
Small businesses may think to themselves, “ I only sell a little bit online – maybe a few vaping products or a few ounces of tobacco.” It’s important to know that the quantity of transactions does not matter – if you sell ANY tobacco products online and process using credit cards, you are subject to ALL rules, both regarding tobacco products AND credit card processing. The fines for violations in these areas are steep and not worth the risk. In addition, repeat offenders may often find themselves placed on a “blacklist,” which could result in an inability to obtain any payment processing services.
What can tobacco resellers do to minimize their risk while processing transactions online?
Most importantly, find a merchant solution that can handle high risk credit card processing, and who understands the laws regarding both tobacco resellers AND credit card processing. Bankcard Brokers is a well-respected payment processor, and provides solutions for higher risk industries. All staff is ETA-CPP (Electronic Transactions Association-Certified Payment Professional) certified. In addition, our team at Bankcard Brokers is well versed in the laws regarding tobacco resellers. We offer solutions for high-risk credit card processing that is both transparent and affordable. The goal is for your business to keep more revenue, and Bankcard Brokers provides payment solutions that allow you to achieve this.
Having a payment processor that understands your needs will help you avoid costly fines and will allow you to continue to accept credit cards for your tobacco reseller business. Contact Bankcard Brokers today to get started on your payment processing solution today!