The cannabis industry in the United States is projected to grow substantially, with estimates suggesting it could reach a market size of $45.8 billion by 2025. Despite this lucrative potential, the industry faces a significant roadblock in the form of payment processing. Credit cards, a popular form of payment in the U.S., are generally not an option for cannabis purchases due to the tension between state and federal laws.
Although cannabis may be legal for recreational or medical use in specific states, it remains a controlled substance at the federal level. This federal classification causes hesitation among credit card companies, which are wary of allowing their services to be used for cannabis transactions.
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The conflict between state legality and federal prohibition creates a complicated landscape for both consumers and the industry, impacting the efficiency and profitability of transactions. It poses a unique challenge for an industry that is otherwise ripe for financial partnerships and modern payment methods. Therefore, despite the high percentage of Americans who prefer using credit cards, the cannabis industry is still largely a cash-only market.
In this article, we will go over some of the financial restrictions put in place on dispensaries in California and see if it’s possible to pay with a card.
- With roughly 1,000 legal cannabis dispensaries in California, countless people are looking to purchase cannabis through a variety of payment methods.
- Due to cannabis still being considered illegal at a federal level, as it is listed in the Controlled Substances Act, most banking institutions and payment processors are unwilling to work with cannabis retailers.
- Due to the current circumstances, most dispensaries in California operate on a cash-only basis, which means that you should always have cash on hand when visiting such locations. Cash is always a great option to purchase something like this super tasty 3.5 Grams of Alien Labs Crème de Menthe Flower!
Can You Use a Credit Card at a Dispensary in California
The answer is no. Using a credit card at a dispensary in California is mostly not going to be possible. While there may be some select dispensaries that allow their customers to use credit cards for a limited amount of time, this usually does not last, and it’s rare.
The Evolution and Growing Acceptable in the Financial Sector
At this time, at a federal level, cannabis is technically still viewed as a Schedule One controlled substance. This means that cannabis is illegal as far as the federal government is concerned. These legal issues make it very hard for banks and credit card payment processors to work in conjunction with cannabis dispensaries and retailers.
The vast majority of banks and credit card processors simply will not work with cannabis dispensaries or businesses (and unfortunately, even with some of the most popular cannabis lounges!). This is especially the case if we are talking about the major credit card networks such as MasterCard and Visa.
Because marijuana is considered a Schedule One controlled substance at a federal level, the vast majority of legitimate banking institutions and payment processors refuse to work with marijuana-related businesses. This is, of course, a big issue for cannabis retailers and dispensaries.
First and foremost, many of these locations are left holding hundreds of thousands of dollars, or even millions of dollars of cash on hand, and need a solution in terms of storage. If they can’t take credit card payments or even open bank accounts, then their money is at great risk because there is no secure way of storing it.
Furthermore, not being able to use credit cards to purchase cannabis also likely leads to a great loss of business, which negatively impacts cannabis retailers. What it comes down to is that not being able to accept credit card payments decreases the chances of dispensaries making sales while simultaneously increasing the risk factor of theft or loss due to such large quantities of cash being kept on the premises. Even if dispensaries don’t accept credit cards, at least there are other payment methods available so you can get cannabis delivered to your door.
A Possibility of Altering the Legal Status of Cannabis at a Federal Level
The future may start looking a bit brighter as far as this issue is concerned. Just recently, President Joe Biden announced that he would be reviewing the designation of marijuana as a Schedule One controlled substance.
Possibly, this could mean moving marijuana down on the controlled substances list, which would result in a relaxation of the laws surrounding it. The best-case scenario is that marijuana is legalized and is no longer considered a controlled substance, although this is admittedly a long shot at this time.
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The SAFE Banking Act
The other major component that appears to be a shining beacon for dispensaries looking to take on credit card payments is the SAFE Banking Act.
This is a new act that would safeguard banks and credit card payment processors from incurring legal ramifications due to working with cannabis companies, allowing cannabis companies to open bank accounts, and allowing them to accept credit card payments. Although this bill has yet to be officially passed, the signs are quite positive.
If all goes well, it should be a short time before banks and payment processors are safeguarded from legal prosecution in the event that they work in conjunction with dispensaries.
Interestingly enough, this new act would safeguard banks and payment processors from incurring legal ramifications due to working with cannabis businesses, even though cannabis or marijuana may still be viewed as illegal at the federal level. This will hopefully make banking institutions and payment processors more inclined to work with dispensaries and cannabis retailers.
Although this hasn’t happened yet, the SAFE Banking Act is something that many dispensaries are looking forward to and counting on as the next in the evolution and growth of the cannabis industry. Let’s hope this act passes because it would make purchasing awesome products such as this Grape Cola 1g Diamond Sauce much easier!
Dispensaries That Have Begun Accepting Credit Cards: A Look into Their System
In general, the vast majority of dispensaries in California and the rest of the USA just have not started accepting credit card payments at all. It is far too risky. Even if the state government deems marijuana as legal, such as in California, remember that it is still considered an illegal controlled substance at the federal level.
Any dispensary that opens up a legitimate bank account with a major institution or tries accepting credit card payments through a major payment processor runs the risk of incurring some pretty serious consequences.
At the very least, bank accounts and credit card dispensaries may choose to discontinue working with the dispensaries once they figure out what is going on.
Even worse, some banking institutions or payment processors may blacklist these merchant accounts. This means that even if it does become completely legal and acceptable to use credit cards as payments in dispensaries, if a dispensary is blacklisted, it will never be able to use that payment processor again.
Setting Up Shell Companies
On that note, some dispensaries appear to be attempting to set up shell companies or storefronts. In other words, some cannabis dispensaries are attempting to use legitimate banking institutions and take credit card payments by masquerading as other businesses, such as restaurants, nail salons, or anything else of the sort.
Of course, this is very much frowned upon and technically illegal. However, this doesn’t stop some dispensaries from trying it anyway, although the legal ramifications if caught may be dire.
The Use of Smaller Cannabis-Specific Credit Card Networks
One trend that appears to be emerging is that various companies are teaming up with dispensaries to allow for the much easier facilitation of credit card payments. For instance, one company is known as SuperNet, and it issues credit cards that run on its own payment network instead of one of the major networks, such as MasterCard or Visa.
There are some dispensaries, such as Columbia Care, which have also created their own credit card that can be used specifically at their stores.
However, because these credit cards are on very small payment networks, they are usually only accepted by one or two specific dispensaries. This might not be a problem if the only reason you want the credit card is to purchase cannabis, but in the grand scheme of things, this system is not yet developed enough to allow for full-scale use.
Third-Party Payment Processors
There are also some third-party payment processors that can accommodate customers paying with credit cards at dispensaries. However, there are not many of these third-party payment processors in existence at this time, and also not many dispensaries that work with them.
What Consumers Need to Know Before Using a Credit Card
What you need to know about using a credit card at a dispensary at this time, whether in California or in the rest of the country, is that it is most likely just not possible.
The vast majority of cannabis dispensaries do not accept credit card payments, and this is because most credit card payment processors do not work with cannabis businesses.
The Legalities of Using Credit Cards
Let’s sum up the legalities of using credit cards in relation to cannabis dispensaries. There are a few important points for you to know.
Federal vs. State Law Conflicts: Why Banks Are Hesitant
The number one reason why banks and credit card payment processors are so hesitant to work with cannabis companies is due to the discrepancies between state laws and federal laws.
As you might know, in the United States, the federal government has the power to create laws that affect the whole country, whereas individual states also have the power to dictate their own laws. Unfortunately, these two sets of laws, the federal and state laws, often conflict with each other, as is most prevalent in the cannabis industry.
For instance, the federal government, according to the Controlled Substances Act, says that marijuana is considered illegal. However, the California State government has deemed cannabis as legal for recreational use.
As you can see, these two laws are conflicting. Unfortunately, state banks are not willing to overlook the federal laws even though individual state laws may have legalized cannabis.
The possible legal and financial ramifications of working with cannabis businesses due to cannabis being a controlled substance at a federal level are too severe for most banks and payment processors to risk.
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Current Stance of Major Credit Card Networks on Cannabis Purchases
The current stance of major credit card networks such as MasterCard and Visa is that cannabis is considered illegal at the federal level and is, therefore, not a viable business venture at this time.
For instance, according to this interview, a Visa representative had the following to say about accepting Visa payment for cannabis, “Transactions in the U.S. involving the purchase or trade of marijuana are not permitted on the Visa network, until such time as federal law allows,.”
A Mastercard representative was also asked about the issue and said, “We continue to monitor the situation, seek guidance from regulators, and inform merchant acquirers of any new developments.”
Challenges Faced by Dispensaries
Realistically, there are three major challenges faced by dispensaries in terms of accepting payments, especially when it comes to credit cards, but also with opening bank accounts.
Opening Legitimate Bank Accounts – Debit Payments
A massive challenge faced by dispensaries, both in California and in other states, is that accepting payments electronically is difficult and often poses logistical issues. Specifically, here we are referring to debit payments and bank accounts.
Having massive amounts of cash on hand, potentially millions of dollars comes with the risk of robbery, theft, loss, and damage. Even if some dispensaries can accept debit card payments, the transaction fees are generally way too high for most people to consider this a feasible option.
Accepting Credit Card Payments
Another challenge faced by dispensaries is being able to accept credit card payments. Credit card payments account for a great deal of spending in the USA.
It serves to reason that there are many people out there who will not purchase cannabis from a dispensary if they are not able to use their credit card.
What it really comes down to is a loss of business and revenue for cannabis dispensaries due to not being able to accept credit card payments. So, not only are these locations left with large amounts of cash on hand, but they’re likely losing money as well.
Federal vs. State Laws
What all of these problems stem from is the fact that the federal government still considers marijuana a Schedule One controlled substance.
Classifying marijuana as illegal at the federal level prevents banking institutions and payment processors from working with cannabis dispensaries.
Between the fact that the current administration may move marijuana out of the Schedule 1 designation on the Controlled Substances Act and the potential passing of the SAFE banking act, it may be the case that dispensaries in California and across the country may start accepting credit card payments.
Furthermore, it is also likely that more retailers will start accepting credit card payments as they start working closer with fintech companies and third-party processors.
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Buying At a Dispensary in California: Frequently Asked Questions
Let’s quickly answer some of your most frequently asked questions about buying cannabis at a dispensary in California.
Are There Dispensaries in California That Currently Accept Credit Cards?
There may be a select few dispensaries in California that currently accept credit cards, although if so, they are very few and far between.
Is It Safe to Use My Credit Card at a Dispensary?
Due to marijuana still being illegal at a federal level, it is recommended to exercise great caution when considering using credit cards at dispensaries.
Will My Credit Card Company Charge Me Extra for Buying Cannabis?
In most cases, credit cards cannot be used at dispensaries. If you do manage to buy cannabis with your credit card, whether or not you will be charged extra is unclear.
Can I Use Digital Currencies or Payment Apps at Dispensaries?
The technology surrounding cryptocurrencies is still a long way from being incorporated into the cannabis world, although there may be a select few institutions that accept cryptocurrency payments. Technically speaking, cannabis dispensaries can accept cryptocurrencies such as Bitcoin.