The cannabis industry is booming but lurking beneath the surface of its rapid growth are serious risks—especially when it comes to cannabis payment processing. With federal laws still prohibiting cannabis sales, many dispensaries are tempted by so-called “workaround” solutions to accept credit cards. But here’s the hard truth: these shortcuts can lead to sudden account shutdowns, frozen funds, and even legal trouble. If you think your dispensary is safe using a processor that claims to have cracked the code to credit card processing for cannabis, think again. Before you swipe that first credit card, let’s uncover the hidden dangers that could put your business at risk.
While many dispensaries are eager to accept credit cards as a convenient payment option, doing so comes with serious risks that can harm both individual businesses and the industry as a whole.
Why Credit Card Processing for Cannabis is Not Legal
We’ve heard it all over the years—claims from processors saying, “We’re a Canadian processor, so it’s legal for us,” or “We’re FINCEN approved,” or even “We’re not bank-related, so it’s legal” or (more commonly) “The beauty is we’re selling gift cards (or crypto) not cannabis so its legal.” But here’s the truth: if any of these claims were legitimate, name one credit card processing provider that has lasted longer than a year without being shut down. You can’t—because they don’t exist.
The only people benefiting from credit card processing for cannabis schemes are the salespeople pushing them and the so-called processors who are misleading both dispensaries and acquiring banks. In reality, all major card networks—Visa, Mastercard, American Express, and Discover—explicitly prohibit cannabis transactions due to federal law. Any processor offering credit card payments to dispensaries is using workarounds that violate card network rules, banking regulations, and potentially even federal law.
One of the biggest misconceptions in the cannabis industry is that some payment processors have found workarounds to process credit card transactions. The reality is that all major card networks—Visa, Mastercard, American Express, and Discover—explicitly prohibit cannabis transactions due to federal prohibition. Any processor offering credit card payments to dispensaries is violating card network rules, banking regulations, and potentially even federal law.
To quote the MasterCard Compliance department directly: “Currently, Mastercard cannot support transactions for marijuana businesses on the Mastercard network. This is because there is an inconsistency between federal and state laws. Our rules require our customers to conduct lawful activity where they are licensed to use our brands. The federal government considers marijuana sales illegal but is currently not challenging state laws that legalize marijuana sales. Given this complexity, we continue to monitor the situation, seek guidance from regulators and inform merchant acquirers of any new developments.”
There are NO workarounds to this – any credit card transaction that results in the purchase of cannabis is against card brand rules and potentially federal law. That means if you take a credit card (even if there is a crypto or a gift card in the middle) and then hand a customer cannabis in return your business has exposure.
The Risks to Dispensaries with Credit Card Processing for Cannabis
If you’re running a dispensary, you probably just want a simple, reliable way for customers to pay—just like any other business. But when it comes to credit card payments, things aren’t as straightforward as they seem. What might feel like a step toward legitimacy can actually expose your business to major financial and legal pitfalls (especially if you have directly misled the processor as to the nature of your business). Here’s what you need to know before you swipe that first credit card.
- Sudden Account Termination & Frozen Funds
Since credit card networks do not support cannabis transactions, any dispensary using a workaround runs the risk of having their merchant account shut down at any time. Processors that attempt to disguise transactions (also known as miscoding) may get away with it for a short period, but once discovered, the dispensary could face frozen funds and an abrupt loss of payment processing capabilities. Shut downs almost always happen at the end of a holiday weekend – and all those sales are frozen by the bank.
- Legal and Regulatory Consequences
Cannabis businesses that process credit card transactions through deceptive means may be exposing themselves to significant legal risks. Banks and payment processors that knowingly misrepresent transactions could face wire fraud or money laundering charges, and dispensaries participating in such schemes could be subject to investigation, fines, and even federal action.
- High Fees and Hidden Costs
Most “credit card solutions” for cannabis businesses come with hefty fees due to the risk involved. These fees can be as high as 5-10% per transaction, significantly cutting into a dispensary’s profits. Additionally, businesses that use third-party intermediaries to facilitate credit card payments may be subject to hidden fees, unreliable service, and predatory contract terms.
- Increased Chargeback Risk
Without clear protections from major card networks, dispensaries accepting credit cards are more vulnerable to chargebacks. Customers can dispute cannabis transactions, and dispensaries may have little recourse to fight back. A high chargeback rate can lead to even faster account shutdowns and financial instability. Not to mention that chargebacks often expose the credit card schemes and it is shut down.
- Business Disruptions and Uncertainty
Many dispensaries that rely on credit card payments find themselves in a precarious position, as these workarounds are not sustainable. When a processing method is shut down, dispensaries are left scrambling to find alternative solutions, disrupting business operations and damaging customer trust.
Why Credit Card Acceptance Hurts the Cannabis Industry
When dispensaries attempt to bypass regulations with deceptive processing methods, it creates long-term problems for the cannabis industry as a whole. Every time a major processor cracks down on these schemes, it sets back progress toward legitimate banking solutions. This instability also deters banks and mainstream financial institutions from entering the market, prolonging the industry’s reliance on cash transactions and other high-risk alternatives.
Additionally, engaging in non-compliant payment processing reinforces negative stereotypes about the cannabis industry, making it harder for businesses to gain credibility and legitimacy in the broader financial ecosystem.
Finally, it does not benefit the patients and customers. Most dispensaries pass these high processing fees onto their clients making products even more expensive.
Choose Stability Over Short-Term Convenience
While the appeal of credit card acceptance is understandable, the risks far outweigh the benefits. Dispensaries must prioritize compliance and long-term stability over quick-fix solutions that could lead to shutdowns, financial losses, and legal trouble. By adopting secure, legal payment processing methods, the cannabis industry can continue to grow while building a strong foundation for the future.
If you’re looking for reliable cannabis payment solutions, Bankcard International Group can help. Contact us today to learn more about secure payment options designed to keep your business running smoothly!
