Vape shops are one of the fastest-growing businesses, but they often face challenges when it comes to payment processing. Most payment processors consider vape shops high-risk because of the perceived association with tobacco products.
The high-risk designation leads to numerous challenges for vape shops when applying for merchant accounts, such as:
- Higher fees
- Difficulty in obtaining merchant accounts
- Limited payment options
- High chargeback rates
- Lengthy application process
Why are Vape Shops a High-Risk Business?
Most processors classify vape shops as high-risk businesses for several reasons:
- Age restriction: While vaping is legal in the U.S.A., its age restriction pushes it into the high-risk category, which results in higher fees and more scrutiny during the application process.
- High chargeback rates: Vape shops have higher chargeback rates than other businesses, which is a red flag for payment processors. Chargebacks occur when customers dispute a transaction with their credit card company. Vape shops face a higher risk of chargebacks because of their association with tobacco products and the perceived health risks associated with vaping.
- Strict government regulations: Vape shops are subject to strict regulations from the FDA, which can also make them high-risk businesses. The FDA regulates the manufacturing, distribution, and marketing of vaping products to protect public health. Compliance with these regulations can be difficult and costly, which can make payment processors wary of working with vape shops.
Vape shops are subject to strict regulations from the FDA, which can make it difficult for them to obtain merchant accounts. The FDA regulates the manufacturing, distribution, and marketing of vaping products to protect public health. Compliance with these regulations can be difficult and costly, which can make payment processors wary of working with vape shops.
High-Risk Credit Card Processing for Vape Shops
High-risk credit card processing is designed for businesses like vape shops that face more risk than other businesses. High-risk payment processors specialize in working with high-risk businesses and have experience in dealing with the unique challenges that they face. Here are some benefits of high-risk credit card processing for vape shops:
- Higher approval rates: High-risk payment processors are more likely to approve vape shops for merchant accounts than traditional payment processors.
- Multiple payment options: High-risk payment processors offer multiple payment options, including credit cards, debit cards, and e-checks.
- Chargeback prevention: High-risk payment processors have systems in place to prevent chargebacks, which can help reduce the risk of losing a merchant account.
- Fraud prevention: High-risk payment processors have advanced fraud prevention systems to protect against fraudulent transactions.
- Competitive fees: High-risk payment processors offer competitive fees that are often lower than traditional payment processors.
Understanding Credit Card Processing Fees for Vape Shops
Credit card processing fees can be complex and confusing, especially for high-risk businesses like vape shops. Here are some fees that vape shops should be aware of:
- Transaction fees: This is a fee that merchants pay every time they process a credit card transaction. Transaction fees can vary depending on the payment processor and the type of card used.
- Chargeback fees: If a customer disputes a transaction, the merchant may be charged a chargeback fee. Chargeback fees can range from $20 to $100 per chargeback.
- Monthly fees: Some payment processors charge a monthly fee for their services.
- Setup fees: Some payment processors charge a one-time setup fee when a merchant account is created.
- Reserve fees: Some high-risk payment processors may require merchants to maintain a reserve account, which is a portion of their sales held in a separate account as a security measure. The reserve account can be used to cover chargebacks or other unexpected expenses.
It’s important for vape shops to understand these fees and to choose a payment processor that offers competitive rates and transparent pricing.
FLEX Payment Solutions Can Help You Navigate The Entire Process
When applying for a merchant account, it’s important for vape shops to be honest and transparent about their business. Fudging details or misrepresenting their business can lead to problems down the line, including losing their merchant account or facing legal consequences. Vape shops should provide accurate information about their business, including their products, services, and sales volume. They should also be upfront about any potential risks or challenges that they may face.
Vape shops face unique challenges when it comes to credit card processing, but with the right payment processor and a solid understanding of the fees and regulations involved, you can overcome these challenges and thrive.
At FLEX Payment Solutions, we understand the high-risk credit card processing designed for businesses like vape shops and help increase chances of approval rates, get you multiple payment options, and offer you competitive fees. Contact us today to help you navigate the potential underlying problems down the line.