CBD companies face unique challenges in securing reliable payment processing. Historically, many mainstream providers, including Square, have been reluctant to support the CBD industry due to regulatory uncertainties. However, Square updated its policy in May 2019, allowing some CBD merchants to process payments. This article explores Square’s current stance and offers vital information for CBD businesses seeking payment solutions.
What are Square’s policies regarding CBD product sales?
Square changed its policy to permit certain CBD product sales in May 2019, specifically those derived from hemp with a tetrahydrocannabinol (THC) concentration of 0.3% or less.
What types of CBD products does Square allow?
Square generally permits the sale of hemp-derived CBD products that comply with the 2018 Farm Bill. This includes items such as CBD oils, edibles, topicals, and other non-THC cannabis products. Merchants must ensure all products adhere to federal and state regulations, including proper labeling and testing.
What types of CBD products does Square prohibit?
Square explicitly prohibits the sale of any products containing more than 0.3% THC, including marijuana and certain derivative products that do not meet legal definitions of hemp. Square also bans the sale of unapproved CBD products, such as those marketed with unproven health claims, or those lacking proper documentation and certification.
Specific Prohibited Items:
- Marijuana and cannabis products exceeding 0.3% THC.
- CBD products with unsubstantiated medical claims.
- Products requiring a prescription for legal sale.
- Products containing synthetic cannabinoids.
What are the eligibility requirements for CBD merchants using Square?
To be eligible, CBD merchants must operate legally and possess all necessary licenses and certifications, including proof that their products contain 0.3% THC or less. Merchants must also demonstrate compliance with federal laws, such as the Farm Bill, and any applicable state and local regulations.
Required Documentation for Square CBD Processing
Square typically requires extensive documentation to approve merchant account applications for CBD businesses. This includes:
- Business licenses.
- Product testing results from accredited laboratories, verifying THC content.
- Proof of legal sourcing for hemp.
- Statements regarding marketing practices and health claims.
Maintaining accurate records and being prepared for regular compliance checks, typically annually, is crucial for continued approval. Companies offering payment analytics and reporting can help manage these document flows.
What are the limitations and potential risks of using Square for CBD sales?
While Square does support some CBD sales, merchants face potential limitations, including account holds, sudden terminations, and higher processing fees compared to lower-risk industries. Square also maintains the right to terminate accounts without notice if they suspect non-compliance, leading to significant business disruption. This is common with high-risk payments.
Account Stability and Reserve Funds
CBD merchants using Square may experience periodic account reviews, which can lead to temporary holds on funding. Square may also impose a rolling reserve or risk reserve, holding back a percentage of daily transactions for a set period, such as 10% for 90 days, to mitigate potential chargeback risks. Merchants should also understand the function of a reserve account to better manage their cash flow.
Processing Fees and Transaction Costs
Square’s processing fees for CBD transactions can be higher than those for standard retail, sometimes reaching up to 3.9% + $0.30 per transaction for online sales. Merchants should carefully compare these rates with other providers to optimize costs. For example, some processors may offer interchange-plus pricing, which can be more cost-effective for businesses with high sales volumes.
What are the alternatives to Square for CBD payment processing?
Due to the inherent risks and limitations associated with general payment processors, many CBD companies opt for specialized payment processors that cater specifically to high-risk payments. These providers are better equipped to handle the unique regulatory and financial complexities of the CBD industry. Merchants can explore options for setting up a merchant account with these specialized providers.
Specialized High-Risk Payment Processors
These processors offer more stable processing solutions, often with transparent pricing models and dedicated support for compliance. They understand the specific requirements for CBD sales, providing robust fraud prevention tools and chargeback management services. When considering different providers, merchants should also evaluate solutions for online payments and in-person payments.
Benefits of High-Risk Processors
- Higher approval rates for CBD merchants.
- Tailored risk management and compliance support.
- More stable processing with fewer account holds or terminations.
- Potentially lower overall costs for high-volume businesses.
For merchants seeking reliable high-risk payment solutions, the Payment Gods Partner Network offers rates starting at 1.5% per transaction with dedicated account management, next-day funding, and transparent pricing with no hidden fees. Get a Free Quote to learn more.
Frequently Asked Questions
Can CBD companies process credit card payments with Square?
Yes, Square allows credit card payments for hemp-derived CBD products containing 0.3% THC or less, provided the merchant meets all eligibility requirements.
Are there any restrictions on marketing CBD products when using Square?
Yes, Square prohibits merchants from making unverified or illegal health claims about CBD products, requiring strict adherence to marketing regulations.
What happens if my Square CBD account is terminated?
If Square terminates a CBD account, merchants will lose their ability to process payments through Square, potentially facing holds on funds and needing to find an alternative processor quickly.
Do I need special software for CBD payment processing?
While not strictly necessary, specialized payment gateways and software designed for high-risk industries can offer better stability and compliance features for CBD businesses.
How long does it take to get approved for CBD payment processing?
Approval times for CBD payment processing can vary from a few days to several weeks, depending on the processor and the completeness of the merchant’s application and documentation.