With the legalization of Cannabis completed in Canada and spreading rapidly throughout the United States, dispensaries are popping up and applying for licenses all over. But a problem remains, especially in the USA, regarding legal banking and taxation around cannabis-related businesses. Federal laws still classify cannabis as a Class A narcotic in the states and that means it’s looked at on the level of cocaine or heroin. This is contradictory to the long-standing proof of marijuana’s medical value and years of research that has been conducted on the matter. But dispensaries are still able to take card-based transactions, how is that possible considering the federal illegality?

Let’s find out.

Debit Card Processing for Cannabis Businesses is the Answer

Find a Cannabis Debit Card Processing Service from Brother Processing

Cannabis Debit Card Processing Services

When you use a debit card to make a purchase it functions in an entirely different way than a credit card. Debit cards operate just like cash does or as though you were using an ATM at the business in question. Credit cards, on the other hand, operate as a loan provided to a customer from a bank or credit union. This is the main point of difference that disallows credit cards to be used for Cannabis in most places in the USA. A bank cannot provide a loan that is used to purchase illegal products and businesses cannot accept loaned money for federally illegal products. 

You may be thinking, “Cannabis is legal in my state, so that shouldn’t apply right?“. Unfortunately not. Because banks must apply and receive FDIC insurance for every customer, even when operating locally, they must comply with both state and federal laws. A bank cannot simply decide to ignore federal statutes because of a local ordinance when they operate across the nation. This can sound a bit confusing, the main takeaway is don’t expect to accept credit cards at your dispensary. 

Debit is Better for Customers and Dispensaries

There are a few key reasons using debit cards is better than cash or credit cards for cannabis purchases. Let’s take a look:

  • Legally compliant with federal and state laws 
  • Cash is cumbersome and people carry it less and less
  • Cash requires a physical cash deposit at the bank, which poses its own risk of theft
  • Debit card purchases mean the customers are paying with funds they have, no one can get into debt or spend what they don’t have with a debit card.
  • There is no APR% on debit cards 
  • Cash is filthy when handled
  • Processing fees on debit cards are lower than on credit cards

This is a short list, but as you can see it is better for dispensaries and customers alike to use a debit card. Not only does it have benefits that credit cards don’t but it also allows banks and dispensaries to stay federally compliant. No one knows if the federal US government will change the status of Cannabis or even bring it up for a vote. So using debit cards may be the only working solution for a long while. 

Cannabis Businesses Should Not be Labeled “High-Risk”

Because many states have legalized Cannabis and more are following suit, no dispensary or related business should be labeled a “high-risk” company. A few years ago, you may have been able to sell CBD or even Cannabis medically, but your business would be labeled “high-risk“. This meant you were looked at by credit card processors in the same way they look at businesses in the gambling and pornography industries. They would offer you credit and debit card processing merchant services but at rates up to 10% in processing fees. Many also required large cash reserves to protect against chargebacks. If your average profit margin per transaction was 20%, you can say goodbye to most of that in the high-risk category. 

Luckily, much of the world has come to its senses when it comes to cannabis. But not every dispensary or marijuana accessory business is getting competitive rates. You should be paying standard processing fees for your debit card transactions. If you’re not, it’s time to change your merchant service provider. 

For the best Cannabis Debit Card Processing Service, look no further than Brother Processing. With over 10 years in the industry and working with hundreds of CBD and marijuana clients, we are investors in the industry and proud to work with every client individually. Give us a call and let’s discuss your business’s needs.