E-Cig Merchant Services
Electronic cigarettes, also know as e Cigs, e Cigarettes and Vaporizers, offer a tobacco alternative that provides the same effects of nicotine on the body as cigarettes normally do without smoke, rather emitting water vapor. The minimal health effects reported by e cigs has helped fuel their growth and popularity while putting the industry on the map, creating an increasing demand for e-cigarette merchant accounts and e cig merchant services by vape shops and smoke shops alike. This tobacco alternative has become one of the fastest growing trends in the last few years in the tobacco industry, opening the door for many new brands to enter the marketplace competing head on against the largest tobacco companies that have responded by launching their own electronic cigarette labels.
Electronic cigarettes remain as an industry that the Federal Government has not fully entered into and begun to regulate, unlike how the cigar and tobacco industries which are handled by both state and federal governments, the e cig industry has operated in a gray area without many restrictions but that has continually been threatened with new restrictions and regulations for everything from the marketing to the flavors of the juices. The lack of regulatory control has allowed for many payment processors to continue working with retail smoke and vape shops and set up e-cigarette merchant accounts while it has become increasingly difficult for merchants in the online electronic cigarette industry to gain approvals.
With fewer banks and payment processors able to handle online electronic cigarette credit card processing, many merchants have found current service providers unstable and few banks willing to accept new businesses without asking for many of the same documentation and registration that tobacco and cigar stores are required to provide. Working with an experienced e-cig merchant services company can help insure that merchants are finding the best banks to handle their retail and online e cig transactions with relative easy and affordable pricing.
E Cig Merchant Account Table of Contents
Who needs E Cig Merchant Accounts?
Advantages to E Cig Merchant Accounts
E Cig Compliance
Vape Shop Merchant Accounts
Start E Cig Credit Card Processing Services
Why Apply for an E Cig Merchant Account?
The first patent for e-cigarettes was issued in 2003 to a Chinese pharmacist Hon Lik, whose company he worked for began selling the smokeless alternative in 2004 to the Chinese market where it was quickly accepted. The idea behind an e cig device was that it would vaporize liquid nicotine and emit a water vapor, similar to a fog, and this novel device was viewed as an improvement upon burning rolled tobacco that emitted smoke and other harmful pollutants into the surrounding area.
E cigs are a battery operated vaporizer that uses a heating coil to convert the liquid nicotine, known as the e juice into a vapor for inhalation and exhaust by the smoker. E Juices are stored in a refillable cartridge and consist primarily of vegetable glycerine, propylene glycol, nicotine and finally the specific flavor that is being used for the juice. The atomizer is the battery operated coil which provides the heat to vaporize the e juices, activated by a sensor within the e cig that detects the smoker attempting to take a drag from the tip.
The growth of the e cig industry has been taken off exponentially since its 2004 debut, with global acceptance and usage extremely high along with sales approaching USD$10 billion a year, there appears to be no slowdown in sight. The growth of e cigarettes has led to hundreds of different brands being produced for consumers today and even some of the largest cigarette and tobacco manufacturers entering the market with their own brands to keep up with the changing trend among smokers today.
What are E-Cigarette Merchant Accounts?
A merchant account is a bank account established at an acquiring bank that allows for the acceptance of credit card and debit card transactions through the Visa, MasterCard, Discover, American Express, JCB or CUP payment networks. Merchants in the electronic cigarette industry accepting payments online, or even in a retail store, have begun experiencing more stringent underwriting processes and increasingly difficult time establishing merchant services than compared to general retail merchants.
Acceptance of payment card transactions will cost merchants additional fees than compared to accepting cash payments, fees that are usually based on the percentage of the sale amount along with additional transaction and monthly fees. The electronic payments made through a bank card, whether a debit or credit card, will notice a delay in the time it takes for the payments to settle into the merchant’s bank account, usually taking a day or 2 for the merchant to realize the deposit.
Who needs an E-Cigarette Merchant Account?
Merchants that are selling e Cigs, Vaporizers or e Juices are the types of businesses that can benefit the most from using a merchant account designed for their business’ needs, whether their products are sold in a storefront location or through an online store. The financial industry today has a reputation of changing their minds on certain types of merchants if their industries are deemed too risky to work with, whether its a decision based on management’s feelings or due to changes in the legal or regulatory environment surrounding that industry.
As of 2016, the FDA regulates all types of tobacco, including electronic cigarettes and e juices that are sold in the United States. At this time the regulation for e cigs is still rather sparse, but this can change rather quickly depending on the ambitions of the FDA or any other government official. Since their introduction to the markets in 2004, there have been increasing changes on a federal level to the what is required by merchants to sell e cigs and e juices, resulting in some financial institutions to change their stance and avoid card not present transactions.
Partnering with an e-cig merchant services company that specializes in tobacco and electronic cigarettes can help ensure that any sudden changes in federal or other regulatory areas that will affect the industry can be handled in a manner that does not disrupt business. This means that a specialized e cig merchant services provider will have a number of different solutions available to quickly and seamlessly adjust their e cig merchant accounts to prevent any loss of credit card processing services.
Advantages of using E-Cigarette Merchant Accounts
Merchants in the e Cig industry have certain needs and requirements of their payment processors to ensure the functionality and longevity of their merchant account services. Since e Cigarettes and vaporizers fall into a grey area for many payment processors it’s important for merchants to ensure that their chosen service provider can handle any potential changes to the legal or payment networks and their ability to accept e cig transactions.
Merchants that decide to use a merchant account, instead of a sponsored payment account, will have the option for direct integration into the acquiring bank, an important function for businesses because it can allow for better approval rates, faster authorizations, higher monthly volume caps and fewer restrictions than most merchant accounts placed through an eWallet or similar type payment account system.
Another important facet to keep in mind when researching electronic cigarette payment processing companies is the functionality with the business’ billing model since most electronic cigarette companies generally offer 2 types. Working with a bank that can accept both 1-time sales or a subscription re-billing program that customers opt into joining can give merchants the flexibility to offer different products and services without creating problems at the payment processor.
Internet-based merchants will also need to consider the payment gateway that they decide to partner with when it comes time to integrate, with many choices available to merchants and payment processors, finding a reliable service is essential. Working with a tobacco payment gateway that can offer a PCI Compliant sales environment will ensure that all online transactions are handled quickly and securely while providing extensive reporting and transaction management can separate the quality of gateway services.
General information about E-Cigarette Credit Card Processing
How Do E-Cigarette Merchant Accounts work?
Once a merchant has obtained merchant services, the payment processor or merchant services company will provide the business with a credit card terminal; either a physical POS system/credit card machine or an online application such as a payment gateway or virtual terminal. Customers making purchases can either swipe or dip their cards upon checkout, or for online sales customers will be able to enter their card information through a secure payment gateway on their own computer or mobile phone.
When the card account information is captured by either a terminal or gateway, the transaction information is encrypted in the payment terminal and sent as a file through the acquiring bank to the payment card network, a secure banking system owned and managed by the companies of Visa, MasterCard, Discover, and American Express. Once the card account information has been received at the payment card network, the file is decrypted and the information is used to determine the card issuing bank that the customer is using.
As soon as the card issuing bank is determined, the payment card network will send over the transaction file At the customer’s card issuing bank, the bank will verify card account information while checking for any potential fraud or other factors that could prevent the transaction from being successful. Once the card account information is verified, the proper fraud checks are passed and the amount of the authorization is checked against the funds available in the customer’s account, an answer to the payment authorization request will be determined.
Authorization requests will usually be answered in a matter of seconds and sent back through the payment network to the merchant acquirer to be presented to both the merchant and the customer at the transaction location. Either a receipt is printed in the merchant storefront through the credit card machine or transaction information being displayed on a secure checkout page within the payment gateway will show record the authorization request and either the transaction ID for approved sales or a code for denied transactions showing the reason for the decline.
Pricing for E-Cigarette Merchant Accounts
Most e-cigarette merchant accounts are set up using one of 2 pricing models; tiered pricing or cost-plus pricing, also known as interchange plus pricing, both provide businesses complete merchant account services with various fees charged for account services, network services, and other transactions. Other merchant services providers offer gimmicks of flat monthly fee or flat transaction fee pricing, but these models almost always end up costing merchants significantly more than a tiered or cost-plus pricing system.
The tiered pricing method charges merchants on either a 3 up to 6 tier scale that varies depending on the customer’s card, acceptance method among other factors. Most introductory fees were right around 1%, appearing to be very low to merchants that signed on to these programs. As merchants learned, few cards qualified for these low tiers and even though debit cards qualified, their costs were significantly lower in a cost-plus environment. The tiered method was a very common system used in the early days of payment processing but has since been losing traction in the industry when matched against a lower interchange plus system.
A cost-plus pricing model discounts every transaction the same amount regardless of the type of card, acceptance method or any other factor that could affect the discount rate. Merchants opting for this pricing system almost always save significant amounts on their payment processing costs and while the saving on qualified or mid-qualified card transactions might be minimal, the savings from debit card and non-qualified rates usually fuels the considerable savings that makes this the preferred pricing method.
Another trend that has caught on in the United States has been the use of flat fee payment processing services, whether the flat fee is per transaction or per month, this sales gimmick has caught on and slowly become an alternative for e-cigarette merchant accounts. Designed for startups, these merchant service programs can become very costly for smaller to larger merchants that rely on merchant services due to the high discount fees and overage fees that are charged to the merchants.
Full Compliance for e Cigarette and Vaporizer Manufacturers, Wholesalers and Retailers
Merchants selling electronic cigarettes products online have to abide by government regulation to ensure labeling and other packaging meets their guidelines and accept any payment processor, acquiring bank or card associations terms set forth prior to being issued a merchant account. Disregard to these agreements and regulations can lead to termination of the merchant account by either the payment processor, acquiring bank or card association and merchants can potentially face harsher penalties depending on the severity of the violations.
In an effort to prevent any future problems, Tobacco Merchant Services helps merchants comply with all terms set forth by the banks and card associations with an easy registration process and our ongoing monitoring of all e-cigarette merchant accounts. Making sure that our e cigarette merchants are always current with documentation to ensure that there are no interruptions of payment processing services or other potential legal issues that we can assist in preventing when using our e cigarette merchant accounts.
Along with maintaining compliance with the payment processor and any laws surrounding the industry, it is important for merchants to be assigned the Merchant Category Code, otherwise known as MCC that reflects their industry. The MCC code is used by the payment card networks to arrange similar type businesses together, allowing for easier maintenance and monitoring of these merchants.
The most common MCC codes used by the payment card network for e cig and vaporizer businesses are:
- 5194 – Tobacco and Tobacco Products
- 5993 – Cigar stores and stands
- 7389 – Business Services, Not Elsewhere Classified (Rarely Used)
E-Cigarette and Vaporizer merchants set up under a different MCC are urged to contact their merchant services provider to ensure that their business is correctly categorized and they will not have any potential problems in the future.
Why E-Cigarette Merchant Accounts are High Risk
In most cases, merchants selling e Cigs or vaporizers are not operating in a manner that would classify a business as high or higher risk, but the potential and perceived risks that these businesses carry have affected many of the bank underwriters. Chargebacks are a concern of every company, especially companies operating in an e-commerce environment, but e Cig merchants are of no additional threat or concern for excessive chargebacks or returns.
Since their inception and release into the US markets, the e cig industry has remained relatively unaffected by significant legislation to regulate and control the industry. With that being said, there are not many requirements by the card payment networks for compliance but some payment processors have begun requiring CNP vaporizer merchants to seek lawyers to draft a legal letter stating the merchant is in full compliance with federal and local tobacco laws.
As the legal waters surrounding electronic cigarettes are navigated, merchants should be prepared for any changes or additional requirements that might be enforced by payment processors or the card networks to continue allowing online sales and even retail transactions through their electronic cigarette merchant accounts.
What about Vape Shop Merchant Accounts
Vape shop credit card processing services are nearly identical to the services used by electronic cigarettes stores, usually requiring the same type of information and documents used by merchants operating e Cig businesses. Working with an industry professional to establish a vape merchant account will help ensure that the application process is handled in a proper and timely manner without incurring any extraordinary fees or charges.
Merchants looking to sell vaporizes online should be aware that many payment processors and banks do have strict guidelines when it comes to the content and marketing materials used by vape merchants. Many underwriters strictly prohibit any reference or images related to drug use, including but not limited to medical marijuana (MMJ) and CBD, also known as Cannabidiol.
The e Cig Payment Gateway
E-Cigarette merchants operating an online store will also need to utilize the services of a payment gateway when accepting payments online, and similar to e-cigarette merchant accounts, not all payment gateways are built the same.
A few of the important functions merchants should expect from their payment gateway:
- Fully PCI Compliant payment services to insure transactions are encrypted and safeguarded against any potential threats.
- Easy to navigate functions including complete reporting, automated or manual batching, easy returns and fast voids for orders needing specific attention.
- Integration into over 100 shopping carts, including nearly every major shopping currently offered on nearly every platform.
- Simplified load balancing functions between merchant accounts with different different acquiring banks.
How to set up e Cig Credit Card Processing Services
When applying for e-cigarette merchant accounts, the bank and/or payment processor will be following an underwriting process that insures that not only does the merchant qualify for a merchant account, but that they will operate within the guidelines set forth by the payment card industry for electronic cigarette manufacturers, wholesalers and retailers.
For general underwriting purposes, most application packages will require merchants to provide the following documents for an electronic cigarette merchant account:
- Completed Application with Merchant’s Social Security Number
- Copy of a valid Drivers License or Passport
- Voided Check from Bank Account
- Tobacco Compliance Letter
- Previous 3-6 months of Bank Statements (Depending on Processor)
- For Existing Merchants; Previous 3-6 months Processing Statements
The underwriting process will vary from payment processor to payment processor, but depending on the type of transactions that the merchant is authorizing, the payment card networks along with most of the banks will require generally the same sets of documents. Proof of the individuals identity along with a completed application are standard industry-wide, helping to maintain a strict level of financial security.
Merchants should be aware that when an account is going through the underwriting process, the credit of the owner(s) will be checked, but a minimum score maintained across the different payment processors. Fortunately for some merchants, perfect credit is not necessarily needed, but underwriters do want to see the history of the owners being able to pay bills and maintain bank accounts that do not have NSF concerns, reducing the risk of the payment processors posting losses with companies using their vape or e-cigarette merchant accounts.
Vape shops and e Cig stores that are currently processing with a merchant account will usually need to present the last 3 to 6 months of credit card statements along with bank statements for the same time period. Underwriters will use this information to access how the merchant operates their business and if partnering with that company will be beneficial to the payment processor.
Some payment processors will require that merchants provide a legal letter of compliance from an attorney stating that they are operating in a manner that fully abides by the regulations of the MasterCard payment networks for the sale of tobacco products and accessories. At this time, the letter is not required by payment processors which can help keep costs lower during the initial application process, these letters may become necessary in the future if e cigs and their juices become federally regulated.
Not all e-cigarette merchant accounts will require the same documentation to set up a services, but this list is a good indicator to the types of items to be prepared to supply during the application process because the more documents you provide, the faster you can get approved.
Tips to Finding the Best Provider for e Cig Merchant Accounts
Once you’re ready to start searching for a payment processor, many merchants will scour the internet; reading websites, reviews and other message boards in hope of finding some answers for the best electronic cigarette merchant services company.
What to ask the e cig payment processor
When a business is ready to start searching for a e cig credit card processing provider, there are a few factors that merchants should keep in mind when interviewing the potential merchant services providers that offer electronic cigarette merchant services.
- Insure they specialize in e cig credit card processing
- Ability to accept CNP (Card Not Present) transactions
- Payment Gateway integration through an API
- Fast Authorizations with High Success Rates
- Daily settlements of transactions
- Secure handling and Fraud Protection of customer account information
- Full Customer Support for all merchant services products
- For certain merchants, insuring they can handle re-billing business models
- Do they use an Interchange Plus pricing schedule
Merchants shopping for a vape merchant account can also use the same criteria when speaking and evaluating payment processors prior to filling out any paperwork. These simple questions can save e Cig and Vape merchants time and money by knowing how each tobacco payment processor works.
Why apply for an Online e Cig Merchant Account?
Merchants looking to expand their business from their retail location to the internet will need the services of online credit card processing and working with Tobacco Merchant Services will insure that your merchant account is safe no matter how payments are accepted. The security that comes from our PCI Compliant payment gateway and our fraud prevention settings allow merchants to process safe and secure transactions online.
Merchants teaming with our online payment processing services will be set up with an API for direct integration into our payment gateway that is compatible with over 100 shopping carts, allowing merchants the ability to easily link their website to our payment gateway. Our tobacco payment gateway was designed to provide merchants with quick reporting and a simple transaction management function to help make managing the business that much easier.
Benefits of using Tobacco Merchant Services
At Tobacco Merchant Services, we have become a leader in providing the best e-cigarette merchant accounts in the industry by providing both retail merchant services and online e cig credit card processing services.
Tobacco Merchant Services offers merchants:
- Low Cost Glass Pipe Credit Card Processing
- High Approval rates for Debt and Credit Cards
- Full PCI Compliance for Secure Transactions
- Industry Leading Online Fraud Protection
- Award winning Customer Support
Our fast application process allows merchants the ability to quickly set up and begin processing transactions while our solid payment processing relationships insure that electronic cigarette companies can continue growing their businesses without interruption or cancellation of services.
Get Started with the Best e Cig Merchant Account Provider
Merchants with questions or in need of more information about our online e-cigarette merchant accounts or online electronic Cigarette credit card processing services are asked to contact us. Our helpful representatives will be happy to assist merchants with all of their needs.