E Cig Merchant Accounts
Electronic cigarettes, also known as e Cigs, e-Cigarettes and Vaporizers offer a tobacco alternative that's increasingly popular today. E cigs provide many of the same effects of nicotine without creating smoke, instead emitting water vapor. This has lead to more vape shops and increased the need for e cig merchant account. While the industry has operated without many regulations, the Federal Government has threatened to clamp down. This has placed the industry into a grey area with many of the online payment processing companies.
Merchants in the electronic cigarette and vaporizer industries have felt the effects of regulatory changes and tightening underwriting guidelines. It is not uncommon for an electronic cigarette payment processor to require the same documentation of tobacco businesses today. Working with an experienced e cig merchant services company can help ensure businesses have reliable and affordable payment processing.
What is an E Cig Merchant Account?
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.
Types of Vape Merchant Account Services
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.
Why E Cigarette Merchant Accounts are High Risk
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.
E Cigarette Merchant Account Pricing
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.
Advantages of Electronic Cigarette Credit Card Processing
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.
Benefits of using Allied Payments' E Cig Payment Processing
Providing the best e-cigarette merchant accounts in the industry by providing both retail and online credit card processing services.
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.