If you’re planning to sell vapes online, one of the first hurdles you will need to overcome is finding merchant services that accept your business. The sale of electronic cigarettes, vape, and related products is considered high risk. This means many merchant account providers will turn you away. Even Square, PayPal, and other processing platforms have been known to freeze merchant accounts considered high-risk with no warning.
Vaping is a massively growing industry that generates over $1 billion in revenue every year and has been shown to help many people quit tobacco use for good. Unfortunately, banks have not been accepting of the industry and new FDA rules have made many banks and merchant account providers even more skittish.
The good news is you can get credit card processing services even with a high-risk business as long as you know where to look.
Factors that Affect Online Vape Sales
Given that merchant accounts for vape companies are considered high risk, makes it inherently more difficult to get credit card processing. When you add sales online where card not present transactions are taking place, banks up the risk factor. What do you mean risk? Good question! Banks consider chance of chargebacks or fraudulent charges the largest risk factors. Any card not present transactions therefore have a higher risk level. So, selling vape products online is doubly risky to the banks.
Beyond the banks, New rules enacted in 2016 by the FDA have a direct impact on payment processing for vape products and the types of products you can offer as a merchant. The new FDA rules prohibit manufacturers and companies that change bottle size and flavor from selling new vape products without registering their product for FDA approval. You will also have significant hurdles if you want to mix your own liquids as each new mix is considered a new product subject to FDA approval, a process that can cost up to $1 million and take years.
The biggest change affecting online vape sales is a rule regarding registration with MasterCard and Visa. In the past, online businesses that sold ecigarette-related products but did not actually sell tobacco were not required to register with Visa and Mastercard or pay the high $1,000 annual fee to accept credit cards. This is no longer true. Now, you must pay a fee of $1,000 every year (which goes to MasterCard and Visa) and register your website to sell vape. In many cases, you are also required to get a letter from a lawyer stating that your business complies with applicable laws like age verification as well.