Tobacco Merchant Accounts and Credit Card Processing

According to data collected by the U.S. Centers for Disease Control and Prevention (the CDC), over 10 billion cigars and close to 260 billion cigarettes were sold in the U.S. in 2015. Smokeless tobacco sales were also impressive for that same period with more than 120 million pounds being sold to retailers as well as wholesalers across the U.S. by the manufacturers. What makes these stats even more impressive is that it was about 1.5 million pounds more than the previous year.

During the last couple of years, authorities and health experts might have improved their efforts to prevent tobacco use, but this industry is still commercially successful. Though, when it comes to the online sale of loose leaf tobacco, cigarettes, smokeless tobacco and cigars, the regulation is not as rigid. As a result, financial institutions are reluctant to engage in business with merchants who sell these products.

Online tobacco merchant accounts have become increasingly more difficult to open over the past few years. Mainstream banks have deviated from approving online tobacco merchants because of the increased risk surrounding them. Health concerns along with heavy regulation make it nearly impossible to open an online tobacco merchant account. Tobacco merchants selling online will need to have certain card brand registrations in order to legally sell their products. Tobacco merchant accounts are available for both US and offshore based tobacco merchants. Our team only works with banks that are actively accepting online tobacco merchants.

Now if you run an e-commerce business, you need to be able to accept and process payments made via credit card and in order to do this you will require an online tobacco merchant account that you must apply for by approaching a merchant processor who deals with high risk businesses. One such high risk merchant processor that is familiar with the problems that an e-commerce tobacco merchant encounters is It does not matter which kind of risk is involved, if you qualify, the Global Pay team can give the green light to an online tobacco merchant account. What is more, they can approve payment processing solutions that are modified to suit your particular needs irrespective of the type or size of your business.

The application process is easy! You can apply online to start the process and can get approval within one to two days. If your business receives approval, their team will also be responsible for setting up payment gateways and tools that will help you to manage your chargebacks. On top of that, they can also help you with fraud filters for your online payments.

Tobacco Merchant Accounts
Tobacco merchant service accounts are difficult to find for online tobacco companies. Years back this was not that big of a concern but today with the increase in online tobacco websites, this has become an ever growing problem. Online tobacco retailers and wholesalers have come under heavy scrutiny by banks as well as by the government. This has deterred many banks from accepting new tobacco clients as well as closing down their current tobacco merchants.

Health concerns along with new and different state laws have fueled the way for tighter underwriting requirements. Each state has different laws in regards to; distribution, transportation and sale of tobacco products. Banks and the card brands accept an elevated amount of risk when approving these accounts. Underwriters need to make sure that every account is properly registered and that the website is compliant and stays compliant. This of course requires more hands on management, which explains the slightly higher cost of tobacco payment processing versus normal low risk processing.

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Online Tobacco Account Application Review
A company must prove to the underwriters that they can indeed adhere to every single rule and regulation if they want to get approved for an online tobacco merchant account. Another important thing is that the underwriters will also evaluate the possible financial risks that the merchant poses to sponsor banks and processors. After these two things have been reviewed, an application will either get declined or approved.

The underwriters will also assess the websites to double-check that no product (for example accessories like pipes) is being advertised for marijuana use. Other things that the website should boast which they will look at are the refund policy, secure SSL, and easy-to-understand privacy policy.

As mentioned earlier, whether or not the merchant will pose any financial risk is also a determining factor. Therefore, your credit score, bank statements and credit card processing history will be checked too. If the balance of your bank account is not too impressive, you have had high chargeback rates in the past or you have missed any payments (or paid your accounts late), you will be regarded as higher risk. This means that if you want to boost your chances of getting approved for a merchant account, you need to show that your online tobacco company can settle any outstanding debt and boast a substantial bank balance. In short, you need to show that your credit history is very good. So, to boost your chances of getting approval for an online tobacco merchant account that does not cap your processing volumes, make a plan to sort out anything that does not portray you in the best light.

Tobacco Merchant Services Are Available For:
• Cigars
• Pipe Tobacco
• Loose Leaf Tobacco
• Ecigarette & Vapor Accessories
• Chewing Tobacco
• Clove Cigarettes
• Tobacco Accessories
• Cigarettes (Offshore Only)

Tobacco merchants normally have a treacherous road ahead as they begin the quest to open a tobacco merchant services account. Our team has developed a group of banks that accept and process for online tobacco companies. These banks understand the requirements and are able to offer competitive pricing. Most tobacco merchants are setup within one week and are able to accept ecommerce as well as phone orders with the provided payment gateway.

Solutions For Every Business:
Setup your retail tobacco shop to accept face to face payments at aggressive rates.

Internet payments are easily accepted when integrated with Global Pay’s gateway.

Accept your customer’s payments over the phone and manually input them into the virtual terminal.

Quick Payouts
Merchants are paid daily with USA accounts and weekly with international accounts.

Several Payment Methods Accepted
Encourage your customers to order now when you accept all major payment methods in real-time.

Your online tobacco company will apply with a simple application along with some supporting documents. Once received, the application is reviewed by the underwriter and most applications are approved within one week.

Tobacco merchants are able to easily integrate the payment gateway with their website and shopping cart. Businesses will also have the ability to manually charge cards with the virtual terminal for orders placed over the phone or by email.

Global Pay’s tobacco merchant accounts include a number of fraud prevention tools that will help to eliminate fraud and chargebacks. Merchants are able to activate fraud prevention tools as they are needed.

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Global Pay’s Stable Tobacco Credit Card Processing Solutions Offer:
Multi-Currency Acceptance
International merchants are able to accept several different currencies; minimizing foreign transaction fees for their customers.

No Volume Caps
Global Pay does not limit the monthly processing volume.

High Transaction Approval
Each tier one bank is located in a “friendly” card brand processing regions to guarantee high transaction approval rates.

Sell Globally
Global Pay allows businesses to process transactions from countries throughout the world.

Fraud Prevention
Each tobacco merchant account is equipped with a suite of customizable fraud prevention tools to reduce chargebacks.

Domestic & Offshore
Both USA processing accounts as well as international/offshore accounts are available.

Laws Pertaining to Online Tobacco Sales
To be honest, these laws are not very clear. For example, the Prevent All Cigarette Trafficking Act prevents you from using the United States Postal Service to send tobacco products such as cigarettes. In addition, mail-order sales retailers as well as online retailers have to adhere to age-verification requirements and need to pay the relevant local, state and federal taxes. Now several sections of the law are challenged as there is some ambiguity in the law that relate to other delivery methods.

Higher Processing Volumes for Your Online Tobacco Merchant Account
A company that poses a high risk like an online tobacco merchant frequently gets approval for a merchant account but with monthly limitations with regards to how many credit card sales you can process. As a result, a merchant might not be able to continue processing their sales for the remainder of that month. That being said, your monthly processing volume cap can increase in as little as three months by showing that you can settle your accounts, have money in a savings account and do not have too many chargebacks.

Why are Chargebacks so Prevalent in the Online Tobacco Industry?
As an online tobacco merchant, you will be at risk when it comes to high chargebacks which makes you a high risk merchant. Why? For starters, an online company is linked to a higher chargeback ratio compared to conventional companies. Though, the main reason is that several customers who are too young to buy tobacco products legally online find ways to buy it. The transaction then frequently gets disputed when parents discover it.

Also, as an online tobacco business is not as old yet, several people will dispute transactions once they have gone over their statement. To make it even more problematic, many times a tobacco company will not send a confirmation of the order or proof of purchase after a sale and when there is no receipt, several people will not recognize the name of the company as it appears on the monthly credit card statement. Lastly there is the issue of slow delivery that can cause more customers to be unhappy with the service and product.

Why are Chargebacks Not Good for Business?
The reality is that there are many new companies that fail to recognize that boasting a low chargeback ratio is key. When you boast a low chargeback ratio, you are in a better position to be able to continue using your online tobacco merchant account (when your chargeback ratio is higher than 1%-2%, your credit card processor can close your merchant account). You definitely do not want your merchant account to be terminated as it will be really hard to get approval for a new account again.

Your credit card processor will quickly close your merchant account if your chargebacks are excessive irrespective of the reason for your high ratio. The reason is that if your online tobacco company is not successful and closes its doors, it will not have to pay any chargeback refunds or fees that are still outstanding. In other words, your sponsor bank and credit card processor will then have to pay all outstanding refunds and fees. In addition, excessive chargebacks will have a bad effect on the relationship between a credit card processor and the credit card company as well as the sponsor bank. The credit card company might even fine a merchant account provider that does not stop processing credit card payments for a company battling with excessive chargebacks.

How do I Calculate My Chargeback Ratio?
To work out your chargeback ratio, you simply take your total of chargebacks and divide it by the number of transactions you got that month. Take note that the ratio is not affected by the dollar value. So, if you had 600 transactions in a month and had to deal with 24 chargebacks for that period, your chargeback ratio would be 4%.

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Reducing Your Chargebacks
There are a couple of reasons that can lead to chargebacks such as unsatisfactory customer service, legal concerns and fraudulent activity. Luckily there are strategies that you can use to prevent chargebacks from happening that will help you to make sure that your chargeback ratio does not skyrocket. For example, if you run an online tobacco company you can ask your customers to send you a photo of themselves holding an identity document that was issued by the government. This will help you to verify the identity of your customers which can prevent expensive chargebacks. Asking your customers for a phone number so that you can contact them to double-check their info is another great strategy. To avoid falling victim to scams, also be sure that you only deliver your products to a residential address.

It is important to remember that customer dissatisfaction can be prevented by keeping your customers informed. Therefore, remember to share itemized billing that lists the total due, vendor’s trading name and customer support contact details with your customers. You should also include the delivery date along with any tracking info.

Most chargebacks happen the first four days after a customer has bought something. This means that it is good practice to make sure that you stay in contact with your customers for seven days after they have bought a product. By doing this, you can improve the chances that they are happy with your service. Other things that merchants should do to improve their communication are emailing a thank-you message and final copy of their receipt (remember to use itemized billing) to customers after they have made a purchase. You can also request that your customers complete a survey about their customer experience to find out whether or not they were satisfied with the product that they have purchased and the service that they have received. By doing these things you can convey to your customers that you do care about them and at the same time it serves as a reminder so that they do not dispute the transaction at a later date.

Using Risk Mitigation Systems to Prevent Chargebacks
The team has come up with a system aimed at online tobacco merchants and other high risk merchants to prevent chargebacks. This system is built on a partnership between Cardholder Dispute Resolution Network and Verifi and can improve your chargeback ratio by more or less 25%. What it does is it gives a merchant a better way to manage the resolution process as it works with the card issuer and bank. Ultimately if you do not manage to prevent chargebacks, there is a real threat that your business will have to close its doors.

How can Online Tobacco Stores get a Merchant Account?
One-of-a-kind pipes and specialized tobacco are desirable items that are expensive or hard to get. What is more, there are a couple of old-fashioned tobacco customers who have started to buy electronic cigarettes. Though, these fields are still regarded as posing a high risk because of rigid government rule and excessive chargebacks.

The good news is that if your chargeback ratio is below 3%, the Global Pay team can track down the ideal merchant account that gets created around the requirements of your company. In fact, your company can get a merchant account in three days! What is more, our rates are affordable and many secure payment gateway solutions are available.

Tobacco merchants will not have to worry about missing regulations since the bank will make sure that all tobacco merchants are correctly registered with the respective card brands, allowing them to sell tobacco products online. Other processors offering payment services to tobacco businesses without proper registration, risk having their; account closed, their funds held and their business placed on the terminated merchant file. This is never an issue with Global Pay LTD.

Higher Processing Volumes for Your Online Tobacco Merchant Account
A company that poses a high risk like an online tobacco merchant frequently gets approval for a merchant account but with monthly limitations with regards to how many credit card sales you can process. As a result, a merchant might not be able to continue processing their sales for the remainder of that month. That being said, your monthly processing volume cap can increase in as little as three months by showing that you can settle your accounts, have money in a savings account and do not have too many chargebacks.

Additional Requirements When Applying for an Online Tobacco Merchant Account
In order to speed up the application process, your business must share the following documentation with the underwriters and processors: a valid identification document that was issued by the government; a letter from your bank; bank statements of the previous three months; your website address and your employer identification number (EIN) or social security number (SSN).

Though, please bear in mind that no approval can be promised.
Contact our office today and speak to one of our account representatives to find out how easy it is to be setup with your own tobacco merchant account.

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