High Risk eCig Merchant Accounts:

Voted the #1 High Risk eCig Merchant Account Provider for the last three years, Soar Payments is laser focused on serving high risk merchants, which includes providing electronic cigarette merchant accounts.

Our goal is to be the undisputed best ecig merchant account provider. To do that effectively, we have to understand the unique needs and underwriting requirements of merchants in the eCig, Vape, Smoke Shop, Glass, e-juice industries, and provide unique products and services to serve them. For business owners in the eCig / Vaping / Smoke Shop / Glass / eJuice industries, we’ve created the below “eCig merchant account cheat sheet”. It’s designed to give business owners a single place to obtain all the information that you’ll need to obtain an eCig merchant account, and succeed long term when accepting debit and credit cards at your business.

To Get Your Vape / eCig Merchant Account:Apply Now


A Note From Our CEO

Jacob of SoarPay eCig Merchant Accounts

Adam CarlsonSoar Payments, CEO

It’s a great time to be in the eCig space.

At least that’s what I hear when talking to some of our eCig online sales and retail sales merchants. The market is growing, the product is getting more mainstream… all good right? Well, not exactly. There’s also increased competition, and frequent payments related problems.

In fact, if you have an eCig or vape business, there are a few significant credit card processing issues you’ll have to hurdle. Things like…

  1. Getting a merchant account in the first place
  2. Controlling chargebacks so you don’t get shut down
  3. Getting enough monthly processing volume.

The good news is, all of these problems are solveable. It took me about 11 hours of research, but I put together the below “electronic cigarette merchant account cheat sheet” for entrepreneurs in the eCig, vaping, ejuice, smoke shop and glass industries. So if you have an eCig e-commerce, phone sales, or retail business, I’d encourage you to read this cheat sheet, which has all the info you’ll need to obtain an eCig merchant account, and have success accepting debit and credit cards at your business.

It’s my sincere hope that you find this article useful (because I put a lot of work into it)… and if you need eCig credit card processing, I’d love to help you with that, too.

Adam-Sig
P.S.If you own an eCig, vaping, smoke shop, juice, pipe or glass related business, and want affordable and easy credit card processing we can help you (in fact, eCig merchant accounts are one of our specialties). Click here to begin a free online application

May 2, 2016

 

eCig Industry Profile:

Electronic cigarettes are battery powered vaporizers which simulate the sensation of smoking, without the tobacco. Typically referred to as “vaping” the user inhales an aerosol (aka vapor) instead of cigarette smoke, which is generated via a heating element in the device which atomizes (gasifies) a liquid solution (commonly called e-liquid). The popularity of e-cigarettes has skyrocketed over the last 3 years, particularly among younger and female clientele.

  • There are approximately 45,000,000 smokers in the US, but only 2,750,000 e-cigarette smokers.
  • Only 6.7% of US adults have even tried an e-cigarette.
  • Sales of e-cigarettes have grown 287% between 2013 and 2015.
  • eCig brand marketshare is still largely fragmented, with the market leader Njoy commanding 32% of the market, followed by Krave at 16%, but thereafter the next three largest manufacturers command a combined 11%, meaning 41% of eCig sales are manufactured by companies which comprise less than 1% of total market share.
  • Today there are more than 3,500 retail vaping shops and locations in every corder of the United States.
  • e-Cig sales are projected to grow nearly 25% YoY through 2018, meanwhile traditional cigarette sales have fallen nearly 30% since 2004. Experts believe e-cig sales will exceed tobacco cigarette sales by 2026.

Categorization of the Electronic Cigarette Industry:

SIC Code: Businesses in the eCig, vaping, e-juice, smoking paraphanelia, and glass industries almost exclusively fall into the 5194 SIC code, however, some businesses have used the following:

  • 5194: Tobacco and Tobacco Products
  • 5993: Tobacco Stores and Stands
  • 5199: Nondurable Goods, not elsewhere classified
  • 7389: Business Services, Not Elsewhere Categorized

See the entire list of SIC codes here.

NAICS Code:: Electronic cigarette, vaping, glass tobacco, e-juice, and smoke shop related businesses generally use the 453991 NAICS code, but occasionally use the following:

  • 453991: Tobacco Stores
  • 424940: Tobacco and Tobacco Product Merchant Wholesalers

See the entire list of NAICS codes here.

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Getting an eCig Merchant Account

In this section we’ll look at everything a business owner needs to know about obtaining an eCig merchant account.

A eCig merchant account is simply a merchant account which will support businesses affiliated with electronic cigarettes. The reason you need an eCig merchant account is because most traditional banks, who offer low risk merchant accounts do not support electronic cigarette businesses. This is largely due to the ongoing regulatory concerns surrounding the eCig and vaping industry, and in the context of eCommerce eCig particularly, concerns relating to chargeback levels of these businesses. In sum, you need an eCig merchant account, because you can’t just go to your local bank and get a merchant account like you could if you owned a retail bakery because they won’t accept your business. So, if your business wants to accept credit cards, you’ll need an eCig merchant account, which is provided by a high risk credit card processor.

What makes an eCig merchant account different, beyond the fact that you’re able to actually get approved, is that it typically has a slightly higher cost than a low risk merchant account, and depending on your specific business may have some additional restrictions such as a rolling reserve, funding delay, or monthly credit card processing volume cap. Most restrictions of this type can be removed after the first three months of successful and stable credit card processing history are established.

Why does my industry type affect my ability to get a merchant account?

The simplest answer, is that payment processors work hand in hand with sponsor banks. To be able to process credit cards, you need not just a payment processor to be willing, but also a bank to be willing to underwrite your industry type. Many of the largest banks (think Wells Fargo and Chase) don’t want to have their brand associated with electronic cigarettes for fear that something negative will come out in publicity. And frankly, these banks are so big, and the eCig industry, relatively speaking, is so small, that they can afford to block this industry type altogether. As a consequence, generally only smaller regional banks support eCig merchant accounts, and these banks generally charge slightly more than the Wells Fargo’s of the world, and usually work exclusively with what are called high risk merchant accounts.

Why are merchant accounts for eCig businesses hard to obtain?

In addition to the reputational considerations that prevent many large banks from underwriting eCig businesses, there are also financial risks to the payment processor and their sponsor bank, which cause some banks and processors not to offer merchant accounts to eCig businesses. To understand those financial risks, it’s important to first understand that a merchant account is, in many ways, exactly like a revolving short term loan from the credit card processor (and their sponsor bank) to your business. That’s because when you accept a credit card payment from a customer you, the merchant, get those funds deposited into your account 24 to 48 hours later. The bank, by contrast, may not actually receive the funds for anywhere from 2 to 30 days later. That “float” is essentially a loan, which were you to process a bunch of stolen credit cards, or not provide actual service or goods for those sales, meaning that they had to ultimately be refunded, the processor and their sponsor bank are on the hook for those refunds. Perhaps the largest financial risk to the credit card processor is the risk of unrecoverable chargebacks. Essentially, when someone makes a purchase at your vape lounge or eCommerce eCig store they have up to 6 months to contest the charge. If they do, this is called a chargeback, and if the merchant doesn’t win the chargeback then they must refund the money. In instances where a business fails to ship or fails to deliver the goods it sells, or worse yet processes stolen credit cards, the quantity of chargebacks can be staggering. In these types of situations, often the business either goes under or refuses to pay their chargebacks, leaving the credit card processor and their sponsor bank liable.

Due to these financial risks, along with the regulatory and reputational risks that apply to eCig merchant accounts, there are relatively few sponsor banks and few credit card processors that accept Vaping or eCig businesses, and even fewer that accept eCommerce eCig businesses.

Who Offers Merchant Accounts for eCig Businesses?

Typically, eCig merchant accounts are provided by high risk credit card processors who work with sponsor banks that support eCig, ejuice, lounge, vaping & glass businesses. High risk merchant account providers typically engage in more robust underwriting of the business (e.g. by running a scan of your website to make sure none of the glass sold looks like the are marketed directly for marijuana or other illegal substances, by closely examining both bank statements and credit card processing history, etc.).


In sum, if you own an electronic cigarette, vape, glass, or other smoking related product, contacting low risk merchant service providers is generally a waste of time because they can’t actually approve your business, so you’ll need to contact a high risk merchant services provider.

How do I get a eCig Merchant Account?

The simple answer is apply with a processor that will accept your account. The more complex and accurate answer, is that you’ll first need to confirm that the credit card processor accepts eCig merchants (you can either check their marketing or talk to a salesperson). Then submit a merchant account application under the business’ name, along with a bunch of supplementary documents (generally the owner’s driver’s license or passport, a voided business check, business bank statements, and previous credit card processing statements, to the extent all of this exists). Your application, and supporting documents, will then be reviewed by the credit card processor’s underwriting department, who may ask a few additional questions. And then, you’ll either be notified that you’re accepted, accepted with conditions (for example a rolling reserve, a funding delay, a required change in pricing terms, etc.), or rejected. Assuming one of the first two, you’ll then get sent your processing equipment if you’re accepting retail swipe payments, or get your payment gateway setup. Then you’re ready to go.

If you need an eCig merchant account, consider applying with us, Soar Payments.

Does Soar Payments offer eCig credit merchant accounts?

Yes. Otherwise creating this ‘cheat sheet’ would have been created just for my own amusement (and it’s not that fun). Seriously though, Soar Payments provides all inclusive eCig merchant accounts for businesses in all aspects of the electronic cigarette, vaping, glass, paraphernalia, and smoking lounge industries. By “all inclusive” what we mean, is that we provide all of the hardware, software, integration support, chargeback management, etc. that you’ll need to fully accept PIN debit, swiped debit, credit and ACH payments at your eCig business. To apply, you can give us a call, just complete our 5-minute free online application, then we’ll email you a PDF copy which lists all terms and pricing for your electronic signature, and once approved, you can begin processing. We’ll handle setting up your chargeback management tools, your payment gateway, and generally making the process easy and simple.

What is an underwriter looking at when reviewing my eCig merchant account application?

A credit card processor’s underwriter is responsible for assessing the risk of a potential business, and accepting or declining the business based on that risk assessment. In the context of an eCig, Vaping or related business, that means looking at the regulatory risk (is the business marketing their products as designed for marijuana, or are they otherwise complying with all applicable laws), and looking at the financial risk (does the business appear to have a strong business model, is the owner’s credit quality acceptable, do the business’ financials support the credit card processing volume they’re requesting, etc.).
So, in general, if you want to get accepted for an eCig credit card processing account, you want to present your business as stable, operating responsibly, and operating within laws.

To Get Your eCig / Vape Merchant Account:Apply Now

Frequently Asked Questions

Most eCig startups, whether retail, MoTo or eCommerce, have aspirations to grow well beyond $50,000 per month (which is generally around what new startup businesses get approved for). If your business does successfully grow, that means that relatively quickly you’ll need to secure additional processing volume. There are two ways that eCig businesses do this: (1) get a higher processing volume cap from their existing credit card processor, or (2) apply with another merchant services provider for a replacement account with a higher limit.


  • More Volume From Existing Processor: When you apply for an eCig or Vaping merchant account, typically you’ll be approved with a volume cap, which means you can only process $X amount per month in credit card volume. After 3-4 months of successful credit card processing, however, you can usually go back to your high risk credit card processor and request additional volume. To get approved for additional volume, you’ll need to have a relatively low and stable chargeback percentage (under 2% generally), you’ll need to be using nearly all of your existing volume (otherwise they’ll question why you need more) and your business’ bank balance will need to be positive (and you’ll have needed to pay all of your bills on time). If you can do those things, in general, you’re going to get approved for additional volume.

  • Additional Merchant Accounts: If, however, you’d prefer not to wait three or four months, or if your existing eCig credit card processor told you that they wouldn’t approve you for additional volume, you’ll need to apply for a second high risk merchant account. If your high risk merchant services provider has relationships with multiple processors and banks (like us!) then you can just ask them to get you a second account. If, however, your merchant services provider only has one bank they work with, you’ll need to go through the application process all over again, and try to get a second approval with another merchant service provider.

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Question? Fire Away. We’re Ready to Help.

Jacob of Soar Payments eCig Merchant Services Provider

Adam CarlsonSoar Payments, CEO

f you’ve got a question about a CRM, payment gateway, chargeback tool, eCig or vape merchant account or anything else related to accepting payments in an ecig business, and want some advice, email me your question directly: AdamCarlson@soarpay.com.

Ready to Get Started?

Ready to start accepting payments at your company, Click here to begin a free online application.

Everything an eCig Merchant Needs to Know About Chargebacks

All merchants have to be cognizant of their chargeback ratio, but that’s even more true for business’ in high risk industries such as electronic cigarettes, because their approval is already on a relatively short leash due simply to their industry type, and excessive chargebacks are the #1 way eCig businesses have their merchant accounts get shut down.

What is a chargeback, and why should I care?

A chargeback, simply defined, is when one of your customers, who has paid via their credit card, is dissatisfied. But instead of contacting you to deal with the issue, just calls their credit card issuer instead, and “dispute the charge”. They can “dispute a charge” for a variety of reasons, some legitimate, some illegitimate. But regardless of why they did it, once the customer has done it, the “chargeback process” has been initiated.

The reason you should care about chargebacks, is that if your chargeback threshold exceeds 2%, your business is in danger of having your eCig merchant account closed / terminated. That means, if more than 2 in every 100 of your customers contacts their issuing bank (again, regardless of whether their complaint is legit or not) then you can long-term plan on your account being closed. So, not only should you care because dealing with disgruntled customers is costly from both a time and money perspective, but also because it endangers your ability to accept payments via a credit card processor. And once you’ve been terminated, it’s incredibly difficult to get your merchant account opened with a new credit card processor. <

How do I calculate my chargeback ratio?

Your chargeback ratio is, again simplified a little here, the total number of chargebacks initiated during a period divided by the number of total transactions in the period. Typically calculated on a monthly basis, that means, in plain english, if you had 100 sales in April, and 2 of your former customers contacted their issuing bank to complain about a transaction in April, you had a 2% chargeback ratio in April. Again, that’s regardless of whether the customer’s reason for disputing the charge was legit, not legit, whether they won or lost the dispute. Note: Some high risk eCig credit card processors calculate your chargeback ratio based on the dollar amount of the chargeback, as opposed to transaction count. So, for instance, if you had 2 disputed transactions for $200 each (total $400), and you sold $10,000 worth of total goods over 100 transactions for the month, then you had a 4% by volume chargeback ratio, (whereas only a 2% by transaction count chargeback ratio). Therefore, it’s important to know which system your credit card processor is using to measure your account, when determining your acceptable chargeback ratio level.

Why do eCig businesses get lots of chargebacks?

Some businesses, and this is true of eCig merchant accounts, are particularly prone to high chargebacks, (and thus categorized as high risk credit card processing) for a few reasons. These include:

  1. Many eCig businesses are small businesses, without particularly strong name recognition, thus there are a disproportionately large number of customers who report that they do not recall making a purchase, when reviewing their credit card statement.
  2. Customers of eCommerce eCig businesses and glass paraphernalia or smoking accessory sales , are often using drop shippers or third-party fulfillment centers to fulfill and ship orders. If there are any delays in the delivery of goods, such as backorders or delivery issues, this can result in a cascade of chargebacks for the eCig business.
  3. Businesses that sell physical goods, particularly those for whom young men are a sizable demographic, often face higher incidence of stolen credit cards being processed as part of a scam. As this is a large demographic, particularly for eCommerce glass and paraphernalia businesses, higher chargebacks can be expected.
  4. Many startup and eCig business owners do not understand the need, or understand proper deployment methods of the chargeback avoidance, fraud filtering, or chargeback mitigation tools available. As a result, they fail to use the same tools that larger or more well-established businesses use. Combine that with the fact that fraudsters know this, and are actively targeting small businesses and startups, and thus the higher expected chargeback ratio.
  5. Many small big businesses do not fully appreciate how important maintaining a low chargeback ratio is to keeping their account (nor how hard it will be to obtain a second MID after the first is closed) and as a result, will not quickly issue refunds where there is any question as to whether the customer deserves the refund, but instead willingly allow the transaction to go to chargeback where they attempt to fight the chargeback.

Why did my merchant account get held / frozen / dropped / terminated due to chargebacks?

If you were recently terminated (aka “account held”, frozen, or dropped) from your credit card processor due to chargebacks, then you likely exceeded the threshold allowable for that credit card processor. If you had a low risk or mid risk merchant account, then your account may have even been shut down with below a 2-3% chargeback ratio. If you had a high risk merchant account, you likely had over a 3% chargeback ratio when your account was shut down. In any case, the reason you were shut down is because credit card processors are extremely sensitive to high levels of chargebacks. They are, for two reasons:

The first reason is that high chargebacks are an early sign that there are serious customer service problems in your business (or business model) and the credit card processor may face future problems. The reason that is of particular concern to the merchant service provider, is that if you are not able to pay for all of the future refunds or chargebacks that they anticipate as coming, the credit card processor may become liable for these.

The second reason is that the credit card processor must maintain a strong relationship with their sponsor bank, and Visa MasterCard AmEx. By continuing to process transactions for businesses that are not able to maintain a low chargeback level, they run the risk of endangering their bank sponsor relationship, or facing fines from the card brands. Typically, the downside risk of either of these events happening, are significantly costlier than any profits your business might be bringing to the credit card processor.

How do I keep my chargeback ratio below 2%

Firstly, it’s important to recognize that the most common reasons for a chargeback are either customer fraud (meaning the customer is using stolen credit cards) or that the customer experience does not match their expectations. So, when trying to keep your chargeback ratio below 2%, the key is to make sure that you’re using sufficient fraud protections (both for e-commerce and retail) and that the customer experience matches their expectations (that is, the customer is informed about the cost of the product, delivery time, scope of services, etc.). Here’s a few ideas that eCig merchants can use…

  • Inform and Disclose: If you purchased something on BestBuy.com and didn’t receive a detailed receipt listing the item purchased, the amount, the vendor, who to contact with issues, and delivery time, you’d likely be very concerned that something was wrong with your order. Despite that, when it comes to setting up their own sales processes, many vaping, glass, and eCig merchants don’t ensure that the same steps are occurring in their sales funnel. So, each step of the way, make sure that the customer is fully informed and that information is adequately disclosed. This may take the form of a detailed payment receipt, shipping tracking ID, a live customer service rep (if you don’t have one, your high risk merchant account provider might offer such a service), and be as transparent as your business model permits.
  • Stay in front of the customer: Most customers initiate a chargeback within 4 days of the original transaction. So, if you want to minimize transactions, following up with the customer 30 days out, does nothing. You need to make sure that you’re following up aggressively to ensure the customer is happy in the week or so following the purchase. That means send a detailed receipt after the transaction, perhaps follow up with a customer satisfaction survey 2-3 days after the transaction and make sure your contact info is in the survey, (you can usually get this service via your high risk credit card processor, from us it costs $9 per month). And just generally get in front of the customer and be very accessible particularly for the first week after a sale.
  • Receive Chargeback Alerts: Chargeback alerts, (aka customer dispute alerts) are literally the easiest thing you can do as an eCig business owner to shave 25% off of your chargeback ratio (it won’t shave 40% no matter what the salesperson tells you). Chargeback alerts, is simply a service that you can sign up for (again, we offer it to our merchants, it costs $9 per month). These alerts tell you that a customer has initiated a chargeback, and provide you with a 3 day window to issue a full refund to the customer. If you do so, there is no chargeback. Obviously, you’re out the money of the purchase, but for businesses trying to control chargeback ratios in order to maintain their account (this is particularly true of eCommerce eCig merchant accounts) then this is an acceptable cost of doing business. Again, these alerts will only catch 1 in 4 chargebacks, so don’t expect this to solve your chargeback problems, but it will help.

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Soar Payments provides all-inclusive high risk ecign credit card processing services to dozens of eCig and Vaping businesses, ranging from startups to businesses processing millions of dollars a month. So when you’re ready, we’re ready.
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