Processing credit cards for CBD oil companies are always challenging for a variety of reasons. The first reason is that the process gets quite complicated and confusing due to the legal interpretation of CBD. Cannabidiol or CBD has close connections with marijuana that many states have declared illegal. CBD oil is obtained from Hemp, and some variants blur the distinction between marijuana and create confusion about its legal status. The credit card companies want to avoid the hassles and discourage CBD oil merchant processing by shunning anything related to it. However, this is just one of the many reasons that credit card companies stay away from patronizing CBD business. There are some other reasons too.
Banks are wary
Banks usually operate across the nation, and you will hardly find any bank that operates within specific states. They follow uniform business rules and welcome all kinds of business that are legal and acceptable throughout the country. If you look at the CBD business, you will observe that the operations of CBD retailers are not nationwide but specific to the states mainly due to the legality of marijuana. Banks are always suspicious about criminality linked to CBD. Despite CBD being legal, it suffers due to its closeness with marijuana. Banks altogether refuse to accept transactions related to it to stay away from the legal complications that may arise from credit card processing related to CBD oil.
Merchant category codes are to blame
Since marijuana is legal only in some states and does not have any legal clearance at the Federal level, banks that process credit card payments related to CBD just refuse to accept it. The other problem arises from the merchant category codes that credit card processors and banks use. If you scan through the list of merchant category codes, you will observe that the items are classified according to the group that they belong, like utilities, gas, and groceries. CBD is different from marijuana because it is a Hemp extract, but when you refer to the list, you will not find any separate category for it. Instead, Hemp extracts get linked to cannabis and marijuana thereby throwing up debates and controversies that only add to the confusion about the legality of CBD. From the perspective of credit card processors, it seems quite logical to shun CBD payment processing.
The present practice
Processing credit card through high-risk merchants is the only way for CBD merchants to accept credit card payments. For doing it, they have to charge fees ranging from 8-10% to cover the costs arising from monthly servicing, chargeback and insurance charges for every transaction. Also, they add charges for the delay of 1-2 weeks that it takes for payments. Another way of circumventing the law is to use a name for the product that does not have any links to CBD or Hemp. However, this leads to some ethical questions about fair business practices.
Modifying the category codes to distinguish between Hemp, CBD, and marijuana is the only way to resolve the problem.