It is not easy to find tobacco merchant accounts in the US because each state has its own laws for the trade and sales of tobacco. The laws of tobacco sales and trade of various states differ from each other in many ways. Therefore, many merchant accounts providers do not offer credit card processing for this sector of ecommerce industry. The providers of tobacco merchant accounts and credit card processing are quite less in numbers, but they do provide excellent services.
 
E-cigarettes are very popular nowadays, and some companies have managed to earn the reputation for providing the best merchant accounts for them. Such companies provide both offshore and domestic payment solutions for tobacco products. These high risk merchant account providers fully understand how different laws work in the different parts of the United States. Anyone who is interested in this business needs to know essential information about tobacco merchant accounts.
 
Most tobacco merchant account providers categorize offshore accounts into two categories. The first category is the merchant account for clients with a history of payment processing. The client seeking this type of tobacco merchant account must provide business banking statements for the last three months and payment processing statements for the last six months. The processing statements must clearly state the company’s name, returns, chargebacks, and total sales. It takes from seven business days up to two weeks for the approval of the account.
 
The other category of offshore tobacco merchant accounts is for startups. A client is required to provide a business banking letter or business banking statements for the last three months. Sometimes, the business banking statements are not available. In that case, the provider would accept personal banking statements for the last three months. The approval of the account takes at least ten business days and up to two weeks. Therefore, you must have the following documents when applying for tobacco merchant accounts:
 
• Business banking statements for the last three months
• Personal banking statements for the last three months
• Payment processing statements for the last six months (it must mention company’s name, total sales, returns, and chargebacks)
 
Domestic tobacco merchant accounts are different. The majority of account providers do not offer merchant accounts for online tobacco businesses due to regulations and strict rules implemented by credit card providers and banks. The reason for this is the high risk nature of online tobacco business. The best solution for this situation is to open an offshore tobacco merchant account. Vendors avoid selling tobacco products within the US and prefer countries where the taxation on tobacco products is less. An offshore merchant account is more than acceptable for online tobacco businesses.
 
The online business of; tobacco, pipes, cigars, cigarettes, and tobacco products have many challenges. Some tobacco merchant account providers offer competitive rates to their clients for business growth. The providers change their payment processing strategy from time to time so you can build your business through merchant banking. However, the majority of providers offer very high fees for this segment of the ecommerce industry. The reasons for the high cost of tobacco related products are due to factors like:
 
• Fees
• Insurance
• Zoning laws
• Licenses
• Associated costs
 
The above stated factors leave very little profit margin for your online business. Therefore, you need a credit card processor who charges highly competitive rates. He must also accept customer payments through; Discover, Amex, MasterCard, and Visa. A good merchant account provider not only supports your business but also specializes in it. He will make it easy for you to sell; cigarettes, cigars, pipes, chewing tobacco, e-cigarettes and nicotine products.
 
Many people do not know that tobacco and nicotine are restricted products by most banks. Such businesses come and go due to factors like tax obligations, shipping restrictions, licensing guidelines, and federal and state laws. In addition, the higher number of chargebacks reduces the longevity and sustainability of online tobacco businesses. You must understand the difference between presenting an imprudent risk and working in a high risk vertical.
 
A good credit card processor is the one that specializes in high risk verticals and evaluates each business on merit. They grow relationships with both domestic and foreign banks. Such a processor is more likely to have a long work history with online tobacco businesses. You should keep these factors in mind whenever you need to choose a credit card processor. It will help you to analyze the pros and cons of the providers and choose one that suits your business the most.
 
Some tobacco merchant account providers ask too much information from clients about their business. Not every customer is comfortable sharing its past financial activity and current marketing practices. Such providers offer strict conditions making it difficult for you to succeed in the ecommerce industry. A good provider and credit card processor would ask for easily-accessible documents to make things manageable for you. Basic information about the business, past processing statements, and banking statements are more than enough. Good providers practice higher levels of communication and customer service.
 
Despite all these challenges, the online business of tobacco products still has a great potential for success. The number of smokers has declined in the US; however, the number of smokers in European countries, Japan, China, and Asian countries has increased. A high percentage of the people in these nations use tobacco in different forms. There is a huge demand for retailers, distributors, and wholesalers of tobacco products. At the same time, there is much fraud in this industry. Tobacco merchants need to choose to work with a payment processor that offers sophisticated fraud prevention tools.
 
Tobacco merchant accounts enable you to accept credit card payments from around the globe. You are no longer limited to wire transfers and electronic checks. Some providers also allow you to set up alternate forms of processing which include; ACH and Check 21. They reduce costs and risks, and they are also a better way to accept payments. The success of your online tobacco business is highly dependent on a safe and reliable payment processor. You should always choose a processor that works hard to reduce and prevent credit card fraud.

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