CBD Merchant Accounts: Why 90% Get It Wrong & How to Avoid Shutdowns in 2025

Most CBD brands don’t lose sales because of bad marketing, they lose them because their payment processor shuts them down without warning. In this episode, Frank exposes the hidden traps that quietly cripple CBD merchants, and reveals the exact steps that keep your business protected. If you’re selling CBD online, this is the playbook that separates brands that scale from brands that get stopped in their tracks.

In this episode, these questions and topics will be covered:

• 01:19 - Why platforms like Stripe, PayPal, and Square seem CBD-friendly at first and the exact moment their risk teams pull the plug, freezing your revenue overnight
• 03:00 - The number one document every CBD product page must have to avoid termination
• 04:34  - Risky phrases that put merchants on the radar for long-term account instability
• 06:19 - What underwriters really look for before they approve you 
• 08:22 - The non-negotiable paperwork stack every CBD merchant needs
• 10:27 - The hidden traps that collapse your ability to process payments

If you’re a CBD merchant who wants stable payment processing, backup accounts, or help fixing a shutdown, Frank and the Paydiverse team are ready to support you. Visit paydiverse.com or reach out at support@paydiverse.com to protect your business and keep your payments running smoothly.

Have a question about something in the episode? Send your questions to Info@PayDiverse.com and check out our FAQ page https://paydiverse.com/faq

Connect with PayDiverse:
Instagram: https://www.instagram.com/paydiverse
Website: http://www.paydiverse.com
LinkedIn: https://www.linkedin.com/in/franksena

Transcript

SPEAKER_00: 0:05

Hey, welcome to the Payments Guide, your ultimate guide to demystifying the confusing world of merchant payments. I'm Frank Senna, your host, a merchant payments specialist with nearly a decade of experience. In each episode, we'll break down the toughest challenges in the payment space so you can be better informed when navigating payments for your own business, from minimizing the impact of chargebacks, avoiding funding issues, and ensuring you're never stuck without the ability to process payments will help you make smarter decisions and grow your business. Let's get started. I'm Frank Senna, the co-founder over at PayDiverse. For years, we've helped hundreds of merchants in high-risk industries like CBD supplements and e-commerce get approved and stay approved with real banks and specialized processors. We understand the pitfalls and will help you avoid them. Most CBD merchants think that getting paid online is as simple as throwing up a Shopify store and getting paid. All of a sudden, boom, your ability to process payments is cut off, your account is closed, and there is just chaos. You're unable to collect payments anymore. Let's unpack why 90% of CBD merchants get this wrong and how to do it right from day one. In this episode, we're going to talk about why mainstream processors will reject CBD merchants. We're going to talk about the exact documents that you need to get approved for a merchant account. We're going to talk about hidden fees, shutdowns, and chargebacks, and the right long-term strategy to keep a CBD brand going strong online. If you have a bad setup, that means you're going to lose sales, have your capital frozen, and potentially be placed on the match list. It's not a good move. Let us help you. So why do most CBD merchants fail at payments? First issue is they fall into the aggregator trap. This is the merchants who sign up with Square or Stripe or PayPal. These platforms are great because you can get signed up really easily and start collecting payment almost immediately. But the downside is yeah, they don't support the sale of CBD products on their platforms. So you might be able to get up and running and process for a couple of weeks or even a couple of months, but eventually you're gonna get shut down once the risk team audits your website. CBD is also in a regulatory gray zone. The legality kind of depends on the hemp source. The THC levels have to be below 0.3%. State laws are completely different. So processors don't love that inconsistency, and a lot of them don't want to deal with that compliance mess. Some merchants get busted because they don't have compliant documentation to show what they're selling on their website. So a requirement for all CBD merchants is that they list their certificates of analysis on every product page. These are certificates built by a third-party laboratory, and they basically will do an analysis and say, this is exactly what is in these products, and here is the chemical breakdown, here's how much THC is in here, and list out all the cannabinoids as well and their percentages, basically showing proof like, hey, these are within regulatory guidelines. If you don't have these COAs or certificates of analysis, then you could your account can get terminated or shut down really easily. You need to make sure you're keeping your product pages updated with the correct ingredients, and you need to make sure you have supplier agreements showing where you're getting these products from or who what business or company you're purchasing them from. And you need to make sure the COAs are not expired because they only last for a couple of years. The last hurdle that CBD merchants see really commonly is unsubstantiated health claims, like saying, Oh, this product will um heal your back pain, or even having testimonials saying, I have never slept better since I've taken this product. Those are unsubstantiated health claims. And anything that's talking about pain relief or a cure for anxiety, it actually violates FDA guidelines and can cause customer disputes too, because customers try this out and they're like, this isn't helping me sleep. What are you talking about? I want a refund. So it can damage, even though you might be getting sales up front, it could damage your revenue long term by um preventing you from actually collecting payments by getting your account shut down or your funds held. So when a bank is underwriting a CBD merchant, they're looking for a couple of specific things. First, they want to see clear product labeling. The product pages must include the label that lists out the ingredients, the dosage, and the percent of THC that's in the product. Every product page for a CBD product must have certificates of analysis listed on there with uh from an accredited lab. Now it has to be able to be downloaded or viewed easily. It can't be super grainy or low quality. You have to be able to see the COA and read it. And then, of course, you need to have very clear pricing, shipping, and refund terms, especially if you have any sort of subscription going on with your website. Um, your processing history is the number one thing that an underwriter looks at for any merchant who is uh applying for a merchant account. Um, the processing history, uh if you're a startup, you're not gonna have processing history. But if you do have processing history, that's the easiest way for the bank to determine how your transaction behavior is gonna be and whether or not you're gonna see disputes or chargebacks on your account. So processing history showing stable volume and low disputes is key if you have processing history. If you have chargeback issues, let's talk. I have a couple of tools that will help you prevent chargebacks from coming in before they even start, or even products that will automatically refund your customers before they file a dispute, which really reduces chargebacks. Banks basically want proof that you're a real business, that they can predict the risk that's going to be associated with your business, and that this isn't just a side hustle for someone who's selling CBD out of their garage that maybe they don't have the funds to operate their business with. So that's what banks are looking out for when determining whether or not they want to go into business with a CBD merchant. So the right way to get approved is by partnering with an acquiring bank or an ISO that knows the CBD space. You don't want to go with one of these aggregators like Stripe Square or PayPal because they do not do an underwriting before you get boarded and before you can start processing transactions. They'll take a look after you're using the account and then they will hold on to your funds for usually 180 days before they're comfortable releasing those funds. So you can really get screwed if you're using an aggregator. You gotta work with a merchant bank that understands the CBD business and is willing to work with you on getting a merchant account. When you are applying for a merchant account for a CBD business, you want to ensure that you have all your documentation together in order. You want to make sure you have a business license or an EIN letter that they can verify your business and that you are licensed to sell these products. You want to make sure that you have certificates of analysis or COAs for every product that you're selling. Make sure that you're able to provide a copy of every vendor agreement that you work with. So if you have a fulfillment house that you work with, we need a copy of that agreement. Who are you purchasing your CBD products from? Is there a manufacturer that you have an agreement with? We need a copy of that as well. Um we're gonna definitely need to see three months of bank statements showing that this merchant has some liquidity or some funds that they can cover any risks associated with the business and they're not gonna just go out of business off of one misstep. If you think about it, you're kind of like interviewing with the merchant bank to see if they're gonna hire you so that you can use their services. So you want to put the best foot forward and you want to provide a strong financial picture about what your business, um, what kind of funding that your business has, that you guys know all about compliance and regulatory guidelines, and um just making sure you're showing them you have your stuff together. The last thing that the bank is gonna take a look at is verifying your identity. So they're gonna need a color government uh cover color copy of a government-issued ID. Make sure your website is clean, there's no unsubstantiated health claims on there, your refund policy is really clear, terms and conditions, privacy policy, and keep the language factual. Don't make any medical claims like this will cure your anxiety or something like that. So, a couple things that can really get a merchant in trouble with a merchant processor is first thing, make sure you understand the business arrangement that you're getting into with this merchant bank before you do it. You want to understand is there a reserve required, which means that the bank is going to withhold a percentage, maybe 10% of all of the funds they collect from you. They withhold that in a reserve account and basically hold those funds just in case you have chargeback issues or something happens and they need to cover their own butts. So they hold on to your money. And a lot of these CBD accounts will come with a reserve. So just make sure you understand the terms of the reserve, how much it is, what is the cap on that reserve, when will you be able to get your money back in your possession? Um, make sure you understand if there are early termination fees, what you know, how long is the agreement that you're getting into, and that you understand the pricing. Another thing that can really destroy your ability to process payments is if you neglect chargebacks. If a merchant, uh customer submits a dispute or a chargeback, you need to respond to that as quickly as possible. You need to think critically about why that came through and make sure it's nothing wrong with your website, your terms and conditions, your fulfillment provider. Um, they want to make sure that you understand why you got a chargeback and that you're doing something to prevent it from happening again in the future. Um, also be really careful that you don't just have one merchant account because if the bank that you're working with decides to exit the CBD space, you will be left scrambling to find a new merchant provider. So we always recommend having at least one backup account. And uh we can help you find all the banks that work with CBD merchants and help you get approved for more than one account. So you have at least one backup. And just make sure you're keeping your website up to date and that your COAs are not out of date because they do expire after a certain period of time. So just make sure you're keeping an eye on that, making sure your website is clean, has updated information, and has updated certificates of analysis. If your account does get shut down, don't freak out. Stay calm and gather data. You want to get access to your transaction logs, your chargeback reports, and your processing statements because these are going to help you to get uh approved with another processor. And you'd also want to get the termination reasons written down so that you have them in writing. Um use a CBD-friendly acquiring bank. At PayDiverse, we have a network of over 200 different payment solutions. We work with all the banks that are in the high-risk space and that work with CBD merchants. So we can help you through our network of relationships find the right banks to help you get set up with a steady solution that's going to stay with you long term. A couple of key takeaways from our episode today are aggregators like PayPal, Square, and Stripe are not CBD friendly. Avoid working with those. And if you are working with them currently, find a backup with a real merchant acquirer as soon as possible. Make sure that everything is compliant and you have all the documentation to show that your products are up to date and compliant. Always be transparent and honest with a merchant bank. Don't try to hide from them. They are professionals, they will find any inconsistencies. It's always best to be upfront and transparent and work with them like a partner. And make sure you have clear refund policies on your site. You want customers to know how to get a refund and you want to avoid customers calling their card credit card company and requesting a dispute or a chargeback. If you need help finding a reliable high-risk payment processor for your CDB business or just protecting your current account, visit paydiverse.com or reach out to us at support at paydiverse.com.